<PAGE>   1


                                                                      EXHIBIT 13


                          ANNUAL REPORT TO SHAREHOLDERS
                      FOR THE YEAR ENDED DECEMBER 31, 1997


<PAGE>   2

                              WAYNE BANCORP, INC.


                               1997 ANNUAL REPORT



                              WAYNE NATIONAL BANK


<PAGE>   3



                               TABLE OF CONTENTS

<TABLE>
<S>                                                                       <C>
Letter to Shareholders.......................................................1

Selected Consolidated Financial Highlights...................................2

Business of the Company......................................................3

Management's Discussion and Analysis of Financial
Condition and Results of Operations........................................3-17

Market for Company's Common Equity and Related
Shareholder Matters.......................................................17-18

Report of Independent Accountants............................................19

Consolidated Financial Statements.........................................20-41

Directors and Officers and Shareholder Information...........................42
</TABLE>


<PAGE>   4

LETTER TO SHAREHOLDERS

         I am proud to report the completion of another outstanding year for
Wayne Bancorp. Inc. (the "Company") and its subsidiary, Wayne National Bank
(the "Bank"). The earnings achieved by the Bank in 1997 have placed it in the
top 3% of its peer group nationwide. The tremendous success experienced by the
Company over the last few years has enabled your Board of Directors to declare
the first dividend in the Company's history. On December 16, 1997, the Board
declared a $.25 per share dividend payable to shareholders of record as of
January 10, 1998.

         The Company had record net income of $1,025,330 in 1997, up 24% from
$828,148 in 1996. Earnings per share, on a fully diluted basis, were $2.35 in
1997, compared to $1.99 in 1996. The Company's earnings in 1997 resulted in a
return on average assets and return on average equity of 2.55% and 19.03%,
respectively, compared to 2.41% and 19.65%, respectively, in 1996.

         The improvement in earnings during 1997 can be attributed primarily to
a 17% increase in net interest income which grew to $2.3 million, compared to
$2.0 million in 1996. Net interest margin was up slightly in 1997 to 6.48%,
compared to 6.45% in 1996. The improvement in net interest income can be
attributed primarily to a 30% increase in average loans outstanding.

         Noninterest income grew 11% to $629,921 in 1997, primarily as a result
of higher fee income on deposits. Noninterest expense grew 7% to $1.4 million
in 1997, as the result of a 6% increase in occupancy expense and a 15% increase
in operating expenses.

         The Company had nonperforming assets of $41,064 at year end 1997,
compared to none at year end 1996. Net charge-offs amounted to .35% of average
loans in 1997, unchanged from .35% in 1996. During 1997, $154,000 was added to
the Bank's loan loss reserve, up 71% from $90,000 in 1996. The allowance for
loan losses was $273,405 at year end 1997, which represents .95% of net year
end loans.

         At year end 1997, shareholders' equity totaled $6.0 million, up 31%
from 1996, bringing book value to $14.23 per share, compared to $12.25 per
share at the end of 1996. The Company's leverage position stood at 14.84% at
year end 1997, compared to 12.33% at year end 1996.

         Please refer to "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Financial Statements included
within this report which disclose the results of the year in greater detail. I
would like to take this opportunity to thank you for your support and I look
forward to seeing each of you at our annual shareholders meeting.

                                   Sincerely,
                                   /s/ Douglas R. Harper
                                   Douglas R. Harper
                                   President & CEO


<PAGE>   5


                              WAYNE BANCORP, INC.
                   SELECTED CONSOLIDATED FINANCIAL HIGHLIGHTS
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>

                                                             1997           1996         % CHANGE
                                                            ------         ------        --------
<S>                                                         <C>            <C>           <C>
Earnings:
  Net interest income                                       $2,320         $1,988             17%
  Provision for possible loan losses                           154             90             71%
  Noninterest income                                           630            569             11%
  Noninterest expense                                        1,358          1,273              7%
  Profit from operations                                     1,438          1,195             20%
  Income taxes                                                 413            367             13%
  Net income                                                 1,025            828             24%

Per Share Data:
  Basic earnings per share                                   $2.58          $2.19             18%
  Net income (on a fully diluted basis)                       2.35           1.99             18%
  Book value                                                 14.23          12.25             16%

Selected Average Balances:
  Total assets                                             $40,272        $34,396             17%
  Loans (net of unearned income)                            27,040         20,768             30%
  Deposits                                                  34,491         29,767             16%
  Shareholders' equity                                       5,389          4,214             28%

Selected Year-End Balances:
  Total assets                                             $51,059        $43,235             18%
  Loans (net of unearned income)                            28,671         23,382             23%
  Deposits                                                  44,554         38,017             17%
  Shareholders' equity                                       6,044          4,628             31%

Selected Ratios:
  Net interest margin                                        6.48%          6.45%
  Return on average assets                                   2.55%          2.41%
  Return on average equity                                  19.03%         19.65%
  Net charge-offs to average loans (net of unearned income)  0.35%          0.35%
  Average equity to average assets                          13.38%         12.25%
  Risk-based capital:
    Tier 1 capital to risk-adjusted assets                  19.36%         18.70%
    Total capital to risk-adjusted assets                   20.24%         19.57%
  Leverage                                                  14.84%         12.33%
</TABLE>


                                       2

<PAGE>   6


         This Annual Report contains statements which constitute
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
statements appear in a number of places in this Annual Report and include all
statements regarding the intent, belief or current expectations of the Company,
its directors or its officers with respect to, among other things: (i) the
Company's financing plans; (ii) trends affecting the Company's financial
condition or results of operations; (iii) the Company's growth strategy and
operating strategy; and (iv) the declaration and payment of dividends.
Investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those projected in the
forward-looking statements as a result of various factors discussed herein and
those factors discussed in detail in the Company's filings with the Securities
and Exchange Commission.

                            BUSINESS OF THE COMPANY

         Wayne Bancorp, Inc. (the "Company") was organized under the Georgia
Business Corporation Code on September 5, 1989, to become a one-bank holding
company by acquiring all the capital stock of Wayne National Bank (the "Bank")
upon its formation. The Bank commenced business on September 26, 1990, and the
only activity of the Company since then has been the ownership and operation of
the Bank. The Bank was organized as a banking association under the laws of the
United States. The Bank is engaged in a general commercial and retail banking
business, emphasizing in its marketing the Bank's local management and
ownership, from its main office in Jesup, Georgia. The products offered include
commercial and retail checking accounts, NOW accounts, money market accounts
and certificates of deposit. The Bank offers commercial loans, agricultural
loans, real estate loans and installment loans. It also acts as an issuing
agent for U.S. savings bonds, traveler's checks, money orders and cashier's
checks, and it offers collection teller services, including wire transfer
services. The Bank also offers a night depository facility, safe deposit boxes,
and ATM service.

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         The following discussion of the Company's financial condition and
results of operation should be read in conjunction with the Company's
Consolidated Financial Statements and related notes and the statistical
information included elsewhere herein.

OVERVIEW

         During 1997, management's attention continued to be focused on
earnings. A relatively stable interest rate environment, together with steady
loan growth throughout the year, combined to bring about a significant increase
in earnings for 1997.

RESULTS OF OPERATIONS

         The Company had net income of $1.0 million in 1997, compared to
$828,148 in 1996, an increase of 24%. Earnings per share, on a fully diluted
basis, were $2.35 in 1997, compared to $1.99 in 1996. The Company's earnings in
1997 resulted in a return on average assets and return on average equity of
2.55% and 19.03%, respectively, compared to 2.41% and 19.65%, respectively, in
1996.

         The improvements in earnings in 1997 can be attributed primarily to
higher net interest income, which grew 17% to $2.3 million in 1997 on net
interest margin of 6.48% and an interest spread of 5.30%. This improvement in
net interest income can be attributed primarily to a 19% increase in average
earning assets brought about by the 16% increase in average deposits. Deposits
grew $6.5 million, or 17%, between December 31, 1996, and December 31, 1997.


                                       3
<PAGE>   7



         The Company had $41,064 in nonperforming assets at year end 1997,
compared to no nonperforming assets at year end 1996. Net charge-offs amounted
to .35% of average loans in 1997, unchanged from 1996. During 1997, the Bank
provided $154,000 to the allowance for loan losses, compared to $90,000 in
1996. The allowance for loan losses totaled $273,405 at year end 1997, which
represents .95% of net year end loans.

         Noninterest income grew $61,020, or 11%, to $629,921 in 1997, from
$568,901 in 1996. This increase resulted primarily from a $65,036, or 16%,
increase in service charges on deposits. Other operating income declined
$2,715, or 2%, while securities gains declined $1,301, or 9%.

         Noninterest expense grew $85,403, or 7%, to $1.4 million in 1997.
Occupancy expenses were up $11,064, or 6%, in 1997 compared to 1996, while
other expenses were up $73,835, or 15%, compared to 1996, primarily as a result
of a $13,000 increase in advertising and a $19,000 increase in professional
fees. The Company's efficiency ratio, which is noninterest expense as a
percentage of net interest income after the provision for loan losses plus
noninterest income, net of gains and losses on the sale of assets, improved to
48.8% in 1997, compared to 51.9% in 1996.

NET INTEREST INCOME/MARGINS

         The primary source of revenue for the Company is net interest income,
which is the difference between income on interest-earning assets, such as
investment securities and loans, and interest incurred on interest-bearing
sources of funds, such as deposits and borrowings. The level of net interest
income is determined primarily by the average balances ("volume") of
interest-earning assets and the various rate spreads between the
interest-earning assets and the Company's funding sources. The table "Average
Balances, Income and Expenses, and Rates" below indicates the Company's average
volume of interest-earning assets and interest-bearing liabilities for 1997 and
1996 and average yields and rates. Changes in net interest income from period
to period result from increases or decreases in the volume of interest-earning
assets and interest-bearing liabilities, increases or decreases in the average
rates earned and paid on such assets and liabilities, the ability to manage the
earning asset portfolio (which includes loans), and the availability of
particular sources of funds, such as noninterest bearing deposits. The table
"Analysis of Changes in Net Interest Income" below indicates the changes in the
Company's net interest income as a result of changes in volume and rate from
1996 to 1997 and from 1995 to 1996.

         Net interest income was $2.3 million for 1997, a 17% increase from
1996. Net interest income increased primarily as a result of an increase in
average earning assets, as earning assets averaged $37.6 million in 1997, up
19% from $31.7 million in 1996. The Bank increased the amount of loans
outstanding during 1997, however, there was a slight decline in the yield
earned on loans. Loans averaged $27.0 million in 1997, up 30% from $20.8
million in 1996, and the average yield decreased to 11.23% in 1997, from 11.72%
in 1996. The combination of this increase in loans and the decline in loan
yield served to increase loan interest income 25% to $3.0 million in 1997, from
$2.4 million in 1996. The Company's net interest spread, the difference between
the taxable equivalent yield on earning assets and the cost of interest-bearing
liabilities, grew slightly in 1997 to 5.30%, from 5.28% in 1996, primarily as a
result of the increased lending activity.

         The key performance measure for net interest income is the "net
interest margin," or net interest income divided by average interest-earning
assets. Unlike net interest spread, net interest margin is affected by the
level of interest-free funding used to support earning assets. The Company's
net interest margin on a taxable equivalent basis rose slightly to 6.48% for
1997, from 6.45% for 1996. Net interest margin is expected to decline slightly
during 1997, reflecting increased competition for loans, resulting in a decline
in the yield on loans. Although such expectations are based on management's
judgment, actual results will depend on a number of factors that cannot be
predicted with certainty, and fulfillment of management's expectations cannot
be assured.


                                       4
<PAGE>   8


         The following table depicts interest income on earning assets and
related average yields as well as interest expense on interest-bearing
liabilities and related average rates paid for the periods indicated.

                AVERAGE BALANCES, INCOME AND EXPENSES, AND RATES
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                        YEAR ENDED DECEMBER 31,                       
                                                      -----------------------------------------------------------
                                                                  1997                           1996                 
                                                      ----------------------------  -----------------------------
                                                      AVERAGE    INCOME/    YIELD/   AVERAGE    INCOME/    YIELD/     
                                                      BALANCE    EXPENSE     RATE    BALANCE    EXPENSE     RATE      
                                                      -------    -------    -----    -------    -------     ----      
<S>                                                   <C>        <C>        <C>      <C>        <C>        <C>        
ASSETS                                                                                                                
Earning Assets                                                                                                        
  Loans(1) .......................................    $27,040    $3,036     11.23%   $20,768    $2,433     11.72%     
  Securities:                                                                                                         
     Taxable......................................      1,751       108      6.17%     5,978       355      5.94%     
     Tax exempt(2)................................      4,507       363      8.05%     2,189       180      8.22%     
  Interest-bearing deposits.......................        137         7      5.11%        60         3      5.00%     
  Funds sold......................................      3,642       201      5.52%     2,326       124      5.33%     
  Other earning assets(2).........................        562        25      4.45%       440        20      4.55%     
                                                      -------   -------     -----    -------    ------      ----      
     Total earning assets ........................     37,639     3,740      9.94%    31,761     3,115      9.81%     
                                                                -------     -----               ------      ----      
                                                                                                                      
Cash and due from banks...........................      1,481                          1,401                          
Premises and equipment............................        957                          1,019                          
Other assets......................................        430                            422                          
Allowance for loan losses.........................       (234)                          (207)                         
                                                      -------                        -------                          
     Total assets.................................    $40,273                        $34,396                          
                                                      =======                        =======                          
                                                                                                                      
LIABILITIES                                                                                                           
Interest-Bearing Liabilities                                                                                          
  Interest-bearing transaction accounts (1)........   $ 4,628        90      1.94%   $ 4,446       109      2.45%     
  Savings deposits (1).............................     4,125       117      2.84%     3,851        97      2.52%     
  Time deposits (1)................................    19,306     1,094      5.67%    15,227       859      5.64%     
  Other short-term borrowings......................         2         0         0%        18         1      5.50%     
  Long-term debt...................................         0         0         0%         0         0      0.00%     
                                                      -------   --------  -------    -------   -------      ----      
     Total interest-bearing liabilities............    28,061     1,301      4.64%    23,542     1,066      4.53%     
                                                                --------  -------              -------      ----      
                                                                                                                      
Demand deposits (1)................................     6,430                          6,241                          
Accrued interest and other liabilities.............       393                            399                          
Shareholders' equity...............................     5,389                          4,214                          
                                                      -------                        -------                          
     Total liabilities and shareholders' equity....   $40,273                        $34,396                          
                                                      =======                        =======                          
                                                                                                                      
Net interest spread................................                          5.30%                          5.28%     
                                                                             ====                           ====      
Net interest income/margin on a taxable                                                                               
  equivalent basis.................................              $2,439                         $2,049                
                                                                 ======                         ======                
Net interest income/margin.........................                          6.48%                          6.45%     
                                                                             ====                           ====      
</TABLE>
                                                     
-----------------------------------
(1)  Average loans include nonaccrual loans.  All loans and deposits are
     domestic.
(2)  Tax exempt income converted to taxable equivalent.


                                       5
<PAGE>   9


         Analysis of Changes in Net Interest Income. The following tables set
forth, on a taxable equivalent basis, the effect which the varying levels of
earning assets and interest-bearing liabilities and the applicable rates have
had on changes in net interest income from 1995 to 1996 and 1996 to 1997.

                   ANALYSIS OF CHANGES IN NET INTEREST INCOME
                             (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>

                                                                      YEAR ENDED DECEMBER 31,
                                                     ------------------------------------------------------
                                                       1997 COMPARED WITH 1996    1996 COMPARED WITH 1995
                                                            VARIANCE DUE TO           VARIANCE DUE TO
                                                     ------------------------------------------------------
                                                       VOLUME     RATE    TOTAL   VOLUME    RATE     TOTAL
                                                     --------     ----    -----   ------    ----     -----
<S>                                                  <C>         <C>      <C>     <C>       <C>      <C>  
EARNING ASSETS
   Loans ............................................   $ 704    ($101)   $ 603    $ 646    $  33    $ 679
   Securities:
     Taxable ........................................    (261)      14     (247)     (87)      (3)     (90)
     Tax exempt .....................................     187       (4)     183       78       14       92
   Funds sold .......................................      73        4       77      (33)     (12)     (45)
   Interest-bearing deposits with banks .............       4        0        4      (11)      (1)     (12)
   Other earning assets .............................       5        0        5        2        2        4
                                                        -----    -----    -----    -----    -----    -----
       Total interest income ........................     712      (87)     625      595       33      628
                                                        -----    -----    -----    -----    -----    -----
INTEREST-BEARING LIABILITIES
   Interest-bearing deposits:
     Interest-bearing transaction accounts ..........       4      (23)     (19)      26      (27)      (1)
     Savings and market rate investments ............       8       12       20        5      (24)     (19)
     Certificates and other time deposits ...........     231        4      235       78      (21)      57
                                                        -----    -----    -----    -----    -----    -----    
       Total interest-bearing deposits ..............     243       (7)     236      109      (72)      37
   Other short-term borrowings ......................      (1)       0       (1)       1        0        1
   Long-term debt ...................................       0        0        0        0        0        0
                                                        -----    -----    -----    -----    -----    -----    
       Total interest expense .......................     242       (7)     235      110      (72)      38
                                                        -----    -----    -----    -----    -----    -----                      
       Net interest income on a taxable 
          equivalent basis ..........................     470      (80)     390      485      105      590
       Less taxable equivalent adjustment ...........      58        0       58       32        0       32
                                                        -----    -----    -----    -----    -----    -----    
       Net interest income ..........................   $ 412    ($ 80)   $ 332    $ 453    $ 105    $ 558
                                                        =====    =====    =====    =====    =====    =====    
</TABLE>

         Interest Sensitivity. The Company monitors and manages the pricing and
maturity of its assets and liabilities in order to diminish the potential
adverse impact that changes in interest rates could have on its net interest
income. The principal monitoring technique employed by the Company is the
measurement of the Company's interest sensitivity "gap," which is the positive
or negative dollar difference between assets and liabilities that are subject
to interest rate repricing within a given period of time. Interest rate
sensitivity can be managed by repricing assets or liabilities, selling
securities available-for-sale, replacing an asset or liability at maturity or
by adjusting the interest rate during the life of an asset or liability.
Managing the amount of assets and liabilities repricing in this same time
interval helps to hedge the risk and minimize the impact on net interest income
of rising or falling interest rates.

         The Company evaluates interest sensitivity risk and then formulates
guidelines regarding asset generation and repricing, funding sources and
pricing, and off-balance sheet commitments in order to decrease interest
sensitivity risk.


                                       6
<PAGE>   10


         The following table illustrates the Company's interest rate
sensitivity at December 31, 1997.

                         INTEREST SENSITIVITY ANALYSIS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>


                                                                    DECEMBER 31, 1997
                                           -----------------------------------------------------------------------
                                                                                              GREATER 
                                                       AFTER ONE     AFTER THREE                THAN
                                            WITHIN      THROUGH        THROUGH      WITHIN   ONE YEAR OR   
                                           ONE MONTH  THREE MONTHS  TWELVE MONTHS  ONE YEAR  NONSENSITIVE    TOTAL
                                           ---------  ------------  -------------  --------  ------------   ------
<S>                                        <C>        <C>           <C>            <C>       <C>            <C>      
ASSETS
Earning Assets (1)
   Loans .................................   $ 8,146    $ 2,817        $  5,379     $16,342    $12,289       $28,631  
   Securities (2) ........................         0          0             100         100      5,414         5,514  
   Interest-bearing deposits with                                                                                     
     banks ...............................       124          0               0         124          0           124  
   Funds sold ............................    11,970          0               0      11,970          0        11,970  
                                             -------    -------        --------     -------    -------       -------  
        Total earning assets .............   $20,240    $ 2,817        $  5,479     $28,536    $17,703       $46,239  
                                             =======    =======        ========     =======    =======       =======  
                                                                                                                      
LIABILITIES                                                                                                           
Interest-bearing liabilities                                                                                          
   Interest-bearing deposits                                                                                          
     Demand deposits .....................   $ 5,086    $     0        $      0     $ 5,086    $     0       $ 5,086  
     Savings deposits ....................     4,073          0               0       4,073          0         4,073  
     Time deposits (3) ...................     2,004      5,223          11,620      18,847      2,769        21,616  
                                             -------    -------        --------     -------    -------       -------  
     Total interest-bearing deposits .....    11,163      5,223          11,620      28,006      2,769        30,775  
   Other short-term borrowings ...........         0          0               0           0          0             0  
   Long-term debt                                                                                                     
                                                   0          0               0           0          0             0  
                                            --------     ------        --------     -------    -------        ------  
        Total interest-bearing liabilities   $11,163    $ 5,223        $ 11,620     $28,006    $ 2,769       $30,775  
                                            ========    =======        ========     =======    =======       =======  
                                                                                                                      
Period gap ...............................   $ 9,077    $(2,406)       $( 6,141)    $   530    $14,934       $15,464  
Cumulative gap ...........................   $ 9,077    $ 6,671        $    530     $   530    $15,464       $15,464  
Ratio of cumulative gap to total                                                                                      
   earning assets ........................      19.6%      14.4%            1.1%        1.1%      33.4%         33.4% 
</TABLE>

------------------------------------------------------------
      (1) Excludes nonaccrual loans and securities.
      (2) Excludes investment equity securities of $535,451.
      (3) Excludes matured certificates which have not been redeemed by the
          customer and on which no interest is accruing.

         The Company generally would benefit from increasing market rates of
interest when it has an asset-sensitive gap and generally would benefit from
decreasing market rates of interest when it is liability sensitive. The Company
is asset sensitive over the one month and one year time frames and liability
sensitive over the one through three months and three through twelve months
time frames. However, the Company's gap analysis is not a precise indicator of
its interest sensitivity position. The analysis presents only a static view of
the timing of maturities and repricing opportunities, without taking into
consideration that changes in interest rates do not affect all assets and
liabilities equally. For example, rates paid on a substantial portion of core
deposits may change contractually within a relatively short time frame, but
those rates are viewed by management as significantly less interest-sensitive
than market-based rates such as those paid on non-core deposits. Accordingly,
management believes a liability-sensitive gap position is not as indicative of
the Company's true interest sensitivity as it would be for an organization
which depends to a greater extent on purchased funds to support earning assets.
Net interest income may be impacted by other significant factors in a given
interest rate environment, including changes in the volume and mix of earning
assets and interest-bearing liabilities.

PROVISION AND ALLOWANCE FOR LOAN LOSSES

         General. The Bank has developed policies and procedures for evaluating
the overall quality of its credit portfolio and for the timely identification
of potential problem credits. On a quarterly basis, management of the 


                                       7
<PAGE>   11


Bank recommends, and the Board of Directors of the Bank approves, the
appropriate level for the allowance for loan losses based on the results of the
internal monitoring and reporting system, analysis of economic conditions in
its market, and a review of historical statistical data for both the Bank and
other financial institutions. Management's judgment as to the adequacy of the
allowance is based upon a number of assumptions about future events which it
believes to be reasonable, but which may or may not be valid. Thus, there can
be no assurance that charge-offs in future periods will not exceed the
allowance for loan losses or that additional increases in the loan loss
allowance will not be required. The adequacy of the allowance for loan losses
and the effectiveness of the Bank's monitoring and analysis system are also
reviewed periodically by the banking regulators and the Bank's independent
auditors and independent loan review firm.

         Additions to the allowance for loan losses, which are expensed as the
provision for loan losses on the Company's income statement, are made
periodically to maintain the allowance at an appropriate level based on
management's analysis of the potential risk in the loan portfolio. Loan losses
and recoveries are charged or credited directly to the allowance. The amount of
the provision is a function of the level of loans outstanding, the level of
nonperforming loans, historical loan loss experience, the amount of loan losses
actually charged against the reserve during a given period, and current and
anticipated economic conditions.

         The table below summarizes certain information with respect to the
Bank's allowance for loan losses and the composition of charge-offs and
recoveries for each of the last two years.

                           ALLOWANCE FOR LOAN LOSSES
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                  YEAR ENDED DECEMBER 31,
                                                       ------------------------------------------

                                                             1997                      1996
                                                             ----                      ----
<S>                                                         <C>                       <C>    
Total loans outstanding at end of period,
    net of unearned income.....                             $28,671                   $23,382
Average amount of loans outstanding,
   net of unearned income.............                      $27,040                   $20,768

Balance of allowance for loan losses at
   beginning of period................                      $   214                   $   197
Loan losses:
   Commercial, financial and
     agricultural.....................                           18                         0
   Real estate - mortgage.............                           20                         7
   Consumer...........................                           97                        81
                                                              -----                      ----
     Total loan losses...............                           135                        88
                                                              -----                      ----
Recoveries of previous loan losses:
   Commercial, financial and
     agricultural.....................                            0                         0
   Real estate - mortgage.............                            4                         3
   Consumer...........................                           36                        12
                                                               ----                      ----
     Total recoveries................                            40                        15
                                                               ----                      ----
Net loan losses.......................                           95                        73
Provision for loan losses.............                          154                        90
                                                               ----                      ----
Balance of allowance for loan losses at
   end of period......................                      $   273                   $   214
                                                            =======                   =======

Allowance for loan losses to period end
   loans..............................                          .95%                      .92%
Net charge-offs to average loans......                          .35%                      .35%
</TABLE>


                                       8
<PAGE>   12

         The provision for loan losses charged to earnings for the year ended
December 31, 1997, amounted to $154,000, compared to $90,000 in 1996. Net
charge-offs amounted to .35% of average loans in 1997, unchanged from 1996. The
provision set aside for loan losses during 1997 was primarily the result of
management's assessment that, even though asset quality remains at a desirable
level, the allowance for loan losses should be increased to reflect the growth
experienced in the loan portfolio. Management feels the allowance is adequate
at this time; however, there can be no assurance that charge-offs in future
periods will not exceed the allowance for loan losses or that additional
increases in the loan loss allowance will not be required.

         Allocation of Allowance. The table below sets forth the amount of the
allowance for loan losses allocated by the Company by loan categories.

                    ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                            DECEMBER 31,
                                              -----------------------------------------------------------------------------
                                                                  1997                                    1996
                                                                  ----                                    ----
                                                       AMOUNT             PERCENT              AMOUNT              PERCENT
                                                       ------             -------              ------              -------
           <S>                                         <C>                <C>                  <C>                 <C>  
           Commercial, financial and
              agricultural                               $ 56               20.5%                $ 23                10.7%
           Real estate                                     93               34.1%                  67                31.3%
           Consumer                                        68               24.9%                  41                19.2%
           Unallocated                                     56               20.5%                  83                38.8%
                                                         ----              -----                 ----               -----
           TOTAL                                         $273              100.0%                $214               100.0%
                                                         ====              =====                 ====               ===== 
</TABLE>

         Nonperforming Assets. The following table presents the Company's
nonperforming assets for the dates indicated.

                              NONPERFORMING ASSETS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                             DECEMBER 31,
                                        ---------------------
                                             1997    1996
                                             ----    ----
<S>                                          <C>     <C>
Nonaccrual loans .......................     $41      $0
Restructured loans .....................       0       0
                                             ---      --
     Total nonperforming loans .........      41       0
Nonaccruing securities .................       0       0
Other real estate owned ................       0       0
                                             ---      --
     Total nonperforming assets ........     $41      $0
                                             ===      ==

Loans past due 90 days or more .........     $13      $0

Allowance for loan losses to period end
   loans ...............................     .95%    .92%
Allowance for loan losses to period end
   nonperforming loans .................   665.9%    N/A
Allowance for loan losses to period end
   nonperforming assets ................   665.9%    N/A
Net charge-offs to average loans .......     .35%    .35%
Nonperforming assets to period end loans
   and foreclosed property .............     .14%    N/A
</TABLE>


                                       9
<PAGE>   13


         Accrual of interest is discontinued on a loan when management
believes, after considering economic and business conditions and collection
efforts, that the borrower's financial condition is such that the collection of
interest is doubtful. A delinquent loan is generally placed in nonaccrual
status when it becomes 90 days or more past due. When a loan is placed in
nonaccrual status, all interest which has been accrued on the loan but remains
unpaid is reversed and deducted from earnings as a reduction of reported
interest income. No additional interest is accrued on the loan balance until
the collection of both principal and interest becomes reasonably certain. When
a problem loan is finally resolved, there may ultimately be an actual writedown
or charge-off of the principal balance of the loan which would necessitate
additional charges to earnings. Nonperforming assets totaled $41,064 at
year-end 1997, or .14% of period end loans.

         Potential Problem Loans. A potential problem loan is one in which
management has serious doubts about the borrower's future performance under the
terms of the loan contract. These loans are current as to principal and
interest and, accordingly, they are not included in the nonperforming assets
categories. Management monitors these loans closely in order to ensure that the
Company's interests are protected. At December 31, 1997, the Company held
fifteen loans considered by management to be potential problem loans totaling
approximately $413,352. The level of potential problem loans is factored into
the determination of the adequacy of the allowance for loan losses.

NONINTEREST INCOME AND EXPENSE

         Noninterest income. The largest component of noninterest income is
service charges on deposit accounts, which totaled $461,931 in 1997, a 16%
increase over the 1996 level of $396,895. There was very little change in the
other components of noninterest income during 1997 as compared to 1996.

         The following table sets forth, for the periods indicated, the
principal components of noninterest income:

                               NONINTEREST INCOME
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                          YEAR ENDED DECEMBER 31,
                                                                          -----------------------
                                                                       1997                     1996
                                                                      ------                   ------
                      <S>                                             <C>                      <C> 
                      Service charges on deposit
                         accounts..........................            $462                     $397
                      Securities gains.....................              14                       15
                      Other................................             154                      157
                                                                       ----                     ----
                           Total noninterest income........            $630                     $569
                                                                       ====                     ====

</TABLE>

                                      10
<PAGE>   14


         Noninterest Expense. The following table sets forth, for the periods
indicated, the primary components of noninterest expense:

                              NONINTEREST EXPENSE
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                   YEAR ENDED DECEMBER 31,
                                                                               -----------------------------
                                                                                1997                   1996
                                                                               -------                ------
                    <S>                                                        <C>                    <C>   
                    Salaries and employee benefits................              $  605                $  604
                    Net occupancy expense.........................                  79                    73
                    Furniture and equipment expense...............                 121                   116
                    Director and committee fees...................                  42                    42
                    Data processing...............................                  23                    21
                    Insurance.....................................                  18                    16
                    Advertising...................................                  35                    22
                    Banking assessments...........................                  24                    21
                    Professional fees.............................                  70                    51
                    Postage and freight and couriers..............                  53                    50
                    Supplies......................................                  74                    74
                    Travel, meetings, seminars, entertainment.....                  19                    20
                    Other.........................................                 194                   163
                                                                                ------                ------
                             Total noninterest expense............              $1,357                $1,273
                                                                                ======                ======

                    Efficiency ratio..............................                48.8%                 51.9%
</TABLE>


         Noninterest expense increased 7% to $1.4 million in 1997 primarily as
a result of increases in advertising expenses, professional fees, and other
expenses. Advertising expense increased $12,838, or 59%, to $34,655 in 1997,
from $21,817 in 1996, as the Bank increased its advertising efforts in response
to increased competition. Professional fees increased $18,768, or 36%, to
$70,278 in 1997, from $51,510 in 1996, primarily as a result of increased legal
fees at both the Company and the Bank.

EARNING ASSETS

         Loans. Loans are the largest category of earning assets and typically
provide higher yields than the other types of earning assets. Associated with
the higher loan yields are the inherent credit and liquidity risks which
management attempts to control and counterbalance. Loans averaged $27.0 million
in 1997, compared to $20.8 million in 1996, an increase of $6.2 million, or
30%. At December 31, 1997, total loans were $28.7 million, compared to $23.4
million at the end of 1996.


                                      11
<PAGE>   15


         In 1997, growth in the Company's loan portfolio accelerated as the
local economy remained strong. The following table shows the composition of the
loan portfolio by category at the dates indicated.

                         COMPOSITION OF LOAN PORTFOLIO
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>


                                                                           DECEMBER 31,
                                                       ---------------------------------------------------
                                                                 1997                      1996
                                                       ---------------------------------------------------
                                                                    PERCENT                      PERCENT
                                                          AMOUNT    OF TOTAL         AMOUNT      OF TOTAL
                                                          -------   --------         --------    ---------
                      <S>                                 <C>       <C>              <C>         <C>  
                      Commercial, financial 
                         and agricultural...........      $ 5,267       18.4%         $ 3,361       14.4%
                      Real estate
                         Construction...............        1,421        4.9%           2,066        8.8%
                         Mortgage - residential.....        7,343       25.6%           6,044       25.8%
                         Mortgage - commercial......        5,248       18.3%           3,341       14.3%
                      Consumer......................        9,390       32.7%           8,261       35.3%
                      Other.........................           29         .1%             337        1.4%
                                                          -------      -----          -------      ----- 
                         Total gross loans..........       28,698      100.0%          23,410      100.0%
                                                                       =====                       ===== 
                      Unearned income...............           27                          28
                                                          -------                     -------
                         Total loans net of
                           unearned income..........       28,671                      23,382
                      Allowance for loan losses.....          273                         214
                                                          -------                     -------
                         Total net loans............      $28,398                     $23,168
                                                          =======                     =======
</TABLE>


         The principal component of the Company's loan portfolio is consumer
loans. At year end 1997, this category totaled $9.4 million and represented 33%
of the total loan portfolio, compared to $8.3 million, or 35%, at the end of
1996. Consumer loans increased $1.1 million, or 14%, at December 31, 1997,
compared to December 31, 1996. The growth in 1997 was primarily a result of the
strong local economy.

         Residential mortgage loans increased $1.3 million, or 21%, to $7.3
million at December 31, 1997, from $6.0 million at year end 1996. This increase
is the result of management's decision to allocate more funds to residential
mortgage loans, primarily to low and moderate income borrowers. Nonresidential
mortgage loans, which include commercial loans and other loans secured by
multi-family properties and farmland, increased $1.9 million, or 57%, to $5.2
million at December 31, 1997, from $3.3 million at year end 1996. This increase
is due primarily to management's ability to attract several new commercial
borrowers. Construction loans declined $644,188, or 31%, due to a slow down in
new home building.

         Commercial, financial and agriculture loans grew by $1.9 million, or
57%, to $5.3 million at December 31, 1997, from $3.4 million at December 31,
1996. This increase is due primarily to management's efforts to increase the
Bank's commercial customer base and to increase lending to farmers.


                                      12
<PAGE>   16


         The repayment of loans in the loan portfolio as they mature is also a
source of liquidity for the Company. The following table sets forth the
Company's loans maturing within specified intervals at December 31, 1997.

      LOAN MATURITY SCHEDULE AND SENSITIVITY TO CHANGES IN INTEREST RATES
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                           DECEMBER 31, 1997
                                                        ----------------------------------------------------------
                                                                       OVER ONE YEAR
                                                         ONE YEAR         THROUGH        OVER FIVE
                                                          OR LESS       FIVE YEARS          YEARS           TOTAL
                                                          -------       ----------          -----          -------
                <S>                                      <C>           <C>               <C>               <C>    
                Commercial, financial and
                   agricultural.....................      $ 3,673         $ 1,351           $  243         $ 5,267
                Real estate ........................        6,388           3,607            4,017          14,012
                Consumer............................        2,786           5,477            1,127           9,390
                Other...............................           29               0                0              29
                                                          -------         -------           ------         -------
                     Total .........................      $12,876         $10,435           $5,387         $28,698
                                                          =======         =======           ======         =======

                Fixed interest rate ................       $6,004         $10,435           $5,387         $21,826
                Variable interest rate .............        6,872               0                0           6,872
                                                          -------         -------           ------         -------
                     Total .........................      $12,876         $10,435           $5,387         $28,698
                                                          =======         =======           ======         =======
</TABLE>

         The information presented in the above table is based on the
contractual maturities of the individual loans, including loans which may be
subject to renewal at their contractual maturity. Renewal of such loans is
subject to review and credit approval, as well as modification of terms upon
their maturity. Consequently, management believes this treatment presents
fairly the maturity and repricing structure of the loan portfolio shown on the
above table.

         Investment Securities. The investment securities portfolio is a
significant component of the Company's total earning assets. Total investment
securities averaged $6.3 million in 1997, compared to $8.2 million in 1996. At
December 31, 1997, the total securities portfolio was $6.0 million, compared to
$8.7 million at December 31, 1996. The decrease in the portfolio during 1997
was primarily due to management's decision to increase the Bank's liquidity
position to enable it to respond more quickly to a change in interest rates and
to partially offset the investment in long term tax exempt municipal bonds. The
decrease in the portfolio also reflects the increased lending activity
experienced in 1997.

         The following table sets forth the book value of the securities held
by the Company at the dates indicated.

                            BOOK VALUE OF SECURITIES
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                          DECEMBER 31,
                                                                 -----------------------------
                                                                    1997                  1996
                                                                    ----                  ----
                <S>                                               <C>                   <C>   
                U.S. Treasury...............................      $    0                $4,273
                U.S. government agencies....................           0                   500
                State, county and municipal securities......       5,514                 3,623
                Other.......................................         485                   331
                                                                  ------                ------
                         Total securities...................      $5,999                $8,727
                                                                  ======                ======
</TABLE>


                                      13
<PAGE>   17


         The following table shows the scheduled maturities and average yields
of securities held at December 31, 1997.

             INVESTMENT SECURITIES MATURITY DISTRIBUTION AND YIELDS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                          DECEMBER 31, 1997
                                           --------------------------------------------------------------------------------
                                                                  AFTER ONE BUT         AFTER FIVE BUT
                                           WITHIN ONE YEAR      WITHIN FIVE YEARS      WITHIN TEN YEARS     AFTER TEN YEARS
                                           ----------------     -----------------      -----------------  ------------------
                                           AMOUNT     YIELD      AMOUNT     YIELD      AMOUNT      YIELD  AMOUNT      YIELD
                                           ------     -----      ------     -----      ------      -----  ------      ------
<S>                                        <C>        <C>        <C>        <C>        <C>         <C>    <C>         <C>  
State and political subdivisions (1)...     $100      6.00%       $399      6.23%         $0        0%    $5,015      8.12%
                                            ----      ----        ----      ---           --        -     ------      ---- 
                  Total (2)............     $100      6.00%       $399      6.23%         $0        0%    $5,015      8.12%
                                            ====      ====        ====      ===           ==        =     ======      ==== 
</TABLE>
----------------------------------------------
(1) Yields based on taxable equivalent.
(2) Excludes $535,451 in investment equity securities.

         In accordance with the Financial Accounting Standards Board (the
"FASB") Statement of Financial Accounting Standards ("SFAS") 115, the Company
classifies its investment securities into the following three categories:
trading, available-for-sale and held-to-maturity. Debt securities that the
Company has the intent and ability to hold until maturity are classified as
held-to-maturity and reported at amortized cost. Trading securities and
available-for-sale securities are reported at market value with unrealized
gains and losses on trading securities reported in income and unrealized gains
and losses on available-for-sale securities reported as a net amount in a
separate component of shareholders' equity until realized. At December 31,
1997, the Company held $535,451 in securities classified available-for-sale and
$5.5 million in securities classified held-to-maturity and reflected an
unrealized gain after tax of $33,377 as a separate component in shareholders'
equity. There can be no assurance that as interest rates change in the future
the amount of unrealized gain will not decrease, but if these securities are
held until they mature and are repaid in accordance with their terms, these
gains will not be realized. Other attributes of the securities portfolio,
including yields and maturities, are discussed elsewhere in "-- Net Interest
Income/Margins -- Interest Sensitivity."

         Short-Term Investments. Short-term investments, which consist
primarily of federal funds sold, equities, and interest-bearing deposits with
other banks, averaged $4.2 million in 1997, compared to $2.8 million in 1996.
At December 31, 1997, short-term investments totaled $12.5 million. These funds
are a primary source of the Bank's liquidity and are generally invested in an
earning capacity on an overnight basis.

DEPOSITS AND OTHER INTEREST-BEARING LIABILITIES

         Average interest-bearing deposits increased $4.5 million, or 19%, to
$28.1 million in 1997, from $23.5 million in 1996. This increase resulted from
increases in all categories of interest-bearing deposits, primarily as a result
of normal deposit growth similar to growth experienced in prior years. The
Company rarely utilizes interest-bearing liabilities other than deposits.

         Deposits. Average total deposits increased $4.7 million, or 16%, to
$34.5 million during 1997, from $29.8 million during 1996. At December 31,
1997, total deposits were $44.6 million, compared to $38.0 million a year
earlier, an increase of 17%. Seasonal local government deposits amounted to
$7.8 million at December 31, 1997, compared to $7.4 million at December 31,
1996. In both years these seasonal deposits are reflected as noninterest
bearing deposits, and were temporarily invested in federal funds sold until
withdrawn in mid-January of the following year.



                                      14
<PAGE>   18


         The following table sets forth the deposits of the Company by category
at the dates indicated.

                                    DEPOSITS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                       DECEMBER 31,
                                    -------------------------------------------------------------------------------
                                                      1997                                       1996
                                    -------------------------------------------------------------------------------
                                                              PERCENT OF                                 PERCENT OF
                                          AMOUNT               DEPOSITS              AMOUNT               DEPOSITS
                                          ------              ----------             ------              ----------
<S>                                       <C>                 <C>                    <C>                 <C>  
Demand deposit accounts.........          $13,779               30.9%                $12,971                34.1%

NOW accounts ...................            5,086               11.4%                  4,508                11.9%

Money market accounts...........            1,924                4.3%                  1,613                 4.2%

Savings accounts ...............            2,148                4.8%                  2,228                 5.9%

Time deposits less than $100,000           15,633               35.1%                 12,263                32.3%

Time deposits of $100,000 or 
over............................            5,984               13.5%                  4,434                11.6%
                                          -------               ----                 -------               -----
         Total deposits.........          $44,554              100.0%                $38,017               100.0%
                                          =======              =====                 =======               ===== 
</TABLE>


         Core deposits, which exclude certificates of deposit of $100,000 or
more and seasonal government deposits, provide a relatively stable funding
source for the Company's loan portfolio and other earning assets. The Company's
core deposits increased $4.6 million in 1997, primarily as a result of normally
recurring deposit growth.

         Deposits, and particularly core deposits, have historically been the
Company's primary source of funding and have enabled the Company to meet
successfully both its short-term and long-term liquidity needs. Management
anticipates that such deposits will continue to be the Company's primary source
of funding in the future. The Company's loan-to-deposit ratio was 64% at
December 31, 1997, and 61% at the end of 1996, and the ratio averaged 78%
during 1997. The Company's loan-to-core deposits ratio was 92% at December 31,
1997, and 88% at December 31, 1996, and the ratio averaged 90% during 1997. The
maturity distribution of the Company's time deposits of $100,000 or more at
December 31, 1997, is shown in the following table.

                     MATURITIES OF CERTIFICATES OF DEPOSIT
                  AND OTHER TIME DEPOSITS OF $100,000 OR MORE
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                        DECEMBER 31, 1997
                                                --------------------------------------------------------------------
                                                                AFTER       AFTER SIX
                                                                THREE        THROUGH
                                                WITHIN THREE   THROUGH        TWELVE      AFTER TWELVE
                                                   MONTHS     SXI MONTHS      MONTHS          MONTHS         TOTAL
                                                   ------     ----------      ------          ------         ------
<S>                                             <C>           <C>           <C>           <C>                <C>   
Certificates of deposit of $100,000 or more...     $2,251        $900         $1,642          $1,191         $5,984
Other time deposits of $100,000 or more.......          0           0              0               0              0
                                                   ------        ----         ------          ------         ------
     Total....................................     $2,251        $900         $1,642          $1,191         $5,984
                                                   ======        ====         ======          ======         ======
</TABLE>


         More than a third, 38%, of the Company's time deposits of $100,000 or
more had scheduled maturities within three months. Large certificate of deposit
customers tend to be extremely sensitive to interest rate levels, making these
deposits less reliable sources of funding for liquidity planning purposes than
core deposits. Some


                                      15
<PAGE>   19


financial institutions partially fund their balance sheets using large
certificates of deposit obtained through brokers. These brokered deposits are
generally expensive and are unreliable as long-term funding sources.
Accordingly, the Company does not actively solicit brokered deposits.

         Borrowed funds. Borrowed funds consist primarily of short-term
borrowings in the form of federal funds purchased from correspondent banks. The
Company strives to fund its loan growth and other investments from deposits.
Accordingly, the Company has relied only occasionally upon borrowed funds to
fund its operations. Borrowed funds, in the form of federal funds purchased,
averaged $2,082 during 1997.

CAPITAL

         Under the capital guidelines of the Federal Reserve Board and the
Office of the Comptroller of the Currency (the "OCC"), the Company and the Bank
are currently required to maintain a minimum risk-based total capital ratio of
8%, with at least 4% being Tier 1 capital. Tier 1 capital consists of common
shareholders' equity, qualifying perpetual preferred stock, and minority
interests in equity accounts of consolidated subsidiaries, less goodwill. In
addition, the Company and the Bank must maintain a minimum Tier 1 leverage
ratio (Tier 1 capital to total assets) of at least 3%, but this minimum ratio
is increased by 100 to 200 basis points for other than the highest-rated
institutions.

         At December 31, 1997, the Company and the Bank exceeded their
regulatory capital ratios, as set forth in the following table.

                              ANALYSIS OF CAPITAL

<TABLE>
<CAPTION>

                                                                                         Required
                                                             Company        Bank         Minimums
                                                             -------        ----         --------
              <S>                                            <C>            <C>          <C> 
              Tier 1 risk-based capital ratio..........        19.4%        16.2%            4.0%
              Total risk-based capital ratio ..........        20.2%        17.1%            8.0%
              Tier 1 leverage ratio....................        14.8%        11.7%            3.0%
</TABLE>



LIQUIDITY MANAGEMENT AND CAPITAL RESOURCES

         Liquidity management involves monitoring the Company's sources and
uses of funds in order to meet its day-to-day cash flow requirements while
maximizing profits. Liquidity represents the ability of a company to convert
assets into cash or cash equivalents without significant loss and to raise
additional funds by increasing liabilities. Without proper liquidity
management, the Company will not be able to perform the primary function of a
financial intermediary and would, therefore, not be able to meet the needs of
the communities it serves.

         Increased liquidity in typical interest rate environments often
involves decreasing profits by investing in earning assets with shorter
maturities. Liquidity management is made more complex because different balance
sheet components are subject to varying degrees of management control. For
example, the timing of maturities of the investment portfolio is very
predictable and subject to a high degree of control at the time investment
decisions are made. However, net deposit inflows and outflows are far less
predictable and are not subject to nearly the same degree of control.

         The Company's funds sold position, its primary source of liquidity,
averaged $3.6 million during the year ended December 31, 1997, and was $11.9
million at December 31, 1997, and averaged $2.3 million during the year ended
December 31, 1996, and was $8.3 million at December 31, 1996. Reflected in the
unusually large funds sold position at December 31, 1997, and December 31,
1996, was approximately $7.8 million and $7.4 million, respectively, of
seasonal government deposits. Within days of each respective year end, the
funds sold position returned to a more normal level. Liquidity can also be
managed using the overnight and short-term borrowed fund markets. The Company
maintains overnight borrowing lines with several financial institutions, and
utilizes these lines on rare occasions.

                                      16
<PAGE>   20



         The Company, as a stand alone corporation, has more limited access to
liquidity sources than the Bank and depends on dividends from the Bank as its
primary source of liquidity. The ability of the Bank to pay dividends is
subject to general regulatory restrictions which may, but are not expected to,
have a material negative impact on the liquidity available to the Company. If
circumstances warrant, the Company's liquidity needs can also be met by
borrowings from third parties, subject to the availability of loan funds on
appropriate terms and the Company's ability to service the debt.

IMPACT OF INFLATION

         Unlike most industrial companies, the assets and liabilities of
financial institutions such as the Company and the Bank are primarily monetary
in nature. Therefore, interest rates have a more significant effect on the
Company's performance than do the effects of changes in the general rate of
inflation and change in prices. In addition, interest rates do not necessarily
move in the same direction or in the same magnitude as the prices of goods and
services. As discussed previously, management seeks to manage the relationships
between interest sensitive assets and liabilities in order to protect against
wide interest rate fluctuations, including those resulting from inflation. See
"-- Net Interest Income/Margins -- Interest Sensitivity."

INDUSTRY DEVELOPMENTS

         Certain recently enacted and proposed legislation could have an effect
on both the costs of doing business and the competitive factors facing the
financial institutions industry. The Company is unable at this time to assess
the impact of this legislation on its financial condition or results of
operations.

YEAR 2000 ISSUES

         The Company utilizes an in-house data processing system for most of
its accounting functions. Management is in the process of upgrading the systems
which it has determined are not prepared for the year 2000 ("Year 2000").
Testing should be completed by the end of 1998. The Company also has a number
of personal computers, some of which, due to their age, are not Year 2000
compliant. Management has budgeted approximately $180,000 to get all of its
systems Year 2000 compliant. The largest Year 2000 exposure to most banks is
the preparedness of the customers of the banks. Management is addressing with
its customers the possible consequences of not being prepared for Year 2000.
Should large borrowers not sufficiently address this issue, the Company may
experience an increase in loan defaults. The amount of potential loss from this
issue is not quantifiable. Management is attempting to reduce this exposure by
educating its customers.

                     MARKET FOR COMPANY'S COMMON EQUITY AND
                          RELATED SHAREHOLDER MATTERS

         As of March 12, 1998, there were approximately 946 holders of record
of the Company's Common Stock and 458,888 shares of Common Stock issued and
outstanding. In addition, there were 99,760 shares of Common Stock subject to
currently outstanding warrants and stock options. There is no established
public trading market in the stock, and there is no likelihood that a trading
market will develop in the near future. The development of a trading market may
be inhibited because a large portion of the Company's shares is held by
insiders. Transactions in the Common Stock are infrequent and are negotiated
privately between the persons involved in those transactions.

         All outstanding shares of Common Stock of the Company are entitled to
share equally in dividends from funds legally available, when, as, and if
declared by the Board of Directors. On December 16, 1997, the Board of
Directors declared a $.25 per share dividend totaling $114,722 payable to
shareholders of record as of January 10, 1998. The dividend is scheduled to be
paid near the end of the first quarter of 1998. This represents the first
dividend in the Company's history. The declaration and payment of future
dividends is uncertain as future earnings may be retained to expand the Bank's
capital base to support deposit growth. Furthermore, the payment 


                                      17
<PAGE>   21
of dividends by national banks is regulated by the OCC, which in turn could
limit the Company's ability to pay dividends. At the request of the OCC, the
Bank adopted a capital policy which provides that the Bank will not pay
dividends to the Company until the Bank is cumulatively profitable. The Company
currently has no source of income other than dividends and other payments
received from the Bank.                                               



                                      18
<PAGE>   22

                    MCNAIR, MCLEMORE, MIDDLEBROOKS & CO., LLP
                          CERTIFIED PUBLIC ACCOUNTANTS
               A PARTNERSHIP INCLUDING A PROFESSIONAL CORPORATION

<TABLE>
<S>                                                                                               <C>
RALPH S. McLEMORE, SR., C.P.A. (1963-1977)                                                         389 MULBERRY STREET
SIDNEY B. McNAIR, C.P.A. (1954-1992)                                                               POST OFFICE BOX ONE
-------------------------------------------                                                        MACON, GEORGIA 31202
SIDNEY E. MIDDLEBROOKS, C.P.A., P.C.                                                                  (912) 746-6277
RAY C. PEARSON, C.P.A.                                                                              FAX (912) 741-8353
J. RANDOLPH NICHOLS, C.P.A.
WILLIAM H. EPPS, JR., C.P.A.                                                                      1117 MORNINGSIDE DRIVE
RAYMOND A. PIPPIN, JR., C.P.A.                                                                     POST OFFICE BOX 1287
JERRY A. WOLFE, C.P.A.                                                                               PERRY, GA 31069
W. E. BARFIELD, JR., C.P.A.                                                                           (912) 987-0947
HOWARD S. HOLLEMAN, C.P.A.                                                                          FAX (912) 987-0526
F. GAY McMICHAEL, C.P.A.
RICHARD A. WHITTEN, JR., C.P.A.
ELIZABETH WARE HARDIN, C.P.A.
CAROLINE E. GRIFFIN, C.P.A.
RONNIE K. GILBERT, C.P.A.
</TABLE>


                        REPORT OF INDEPENDENT ACCOUNTANTS



The Board of Directors
Wayne Bancorp, Inc.

We have audited the accompanying consolidated balance sheets of WAYNE BANCORP,
INC. AND SUBSIDIARY as of December 31, 1997 and 1996 and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Wayne
Bancorp, Inc. and Subsidiary as of December 31, 1997 and 1996 and the
consolidated results of operations and cash flows for each of the years in the
three-year period ended December 31, 1997 in conformity with generally accepted
accounting principles.


                                 /s/ MCNAIR, MCLEMORE, MIDDLEBROOKS & CO., LLP

                                 McNAIR, McLEMORE, MIDDLEBROOKS & CO., LLP

Macon, Georgia
February 20, 1998





                                       19
<PAGE>   23

                       WAYNE BANCORP, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                                   DECEMBER 31


                                     ASSETS

<TABLE>
<CAPTION>
                                                           1997                    1996
                                                        ------------             -----------
 <S>                                                    <C>                      <C>
 CASH AND DUE FROM BANKS                                $  3,075,396             $ 1,385,896
                                                        ------------             -----------

 FEDERAL FUNDS SOLD                                       11,970,000               8,280,000
                                                        ------------             -----------

 INTEREST-BEARING DEPOSITS WITH BANKS                        124,003                 255,152
                                                        ------------             -----------

 INVESTMENT SECURITIES
   Available for Sale                                        535,451               5,102,326
   Held to Maturity                                        5,514,009               3,622,528
                                                        ------------             -----------

                                                           6,049,460               8,724,854
                                                        ------------             -----------

 LOANS                                                    28,698,690              23,410,171
   Allowance for Loan Losses                                (273,405)               (213,969)
   Unearned Loan Fees                                        (27,380)                (27,967)
                                                        ------------             -----------

                                                          28,397,905              23,168,235
                                                        ------------             -----------

 BANK PREMISES AND EQUIPMENT                                 907,405                 997,013
                                                        ------------             -----------

 OTHER ASSETS                                                534,373                 423,600
                                                        ------------             -----------


 TOTAL ASSETS                                            $51,058,542             $43,234,750
                                                        ============             ===========
</TABLE>





The accompanying notes are an integral part of these balance sheets.





                                     20
<PAGE>   24

                       WAYNE BANCORP, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                                   DECEMBER 31


                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                               1997                    1996
                                                                            -----------            -----------
 <S>                                                                        <C>                    <C>
 DEPOSITS
   Noninterest-Bearing                                                      $13,779,191            $12,970,694
   Interest-Bearing                                                          30,775,238             25,045,809
                                                                            -----------            -----------

                                                                             44,554,429             38,016,503

 OTHER LIABILITIES                                                              460,057                590,480
                                                                            -----------            -----------

 TOTAL LIABILITIES                                                           45,014,486             38,606,983
                                                                            -----------            -----------


 STOCKHOLDERS' EQUITY
   Common Stock, Par Value $1 Per Share; 10,000,000 Shares
     Authorized, 424,888 and 377,786 Shares Issued and
     Outstanding as of December 31, 1997 and 1996, Respectively                 424,888                377,786
   Surplus                                                                    3,778,020              3,354,102
   Retained Earnings                                                          1,807,771                897,163
   Net Unrealized Gain (Loss) on Securities Available for Sale,
     Net of Tax (Benefit) of $17,194 in 1997 and $(661) in 1996                  33,377                 (1,284)
                                                                            -----------            -----------

 TOTAL STOCKHOLDERS' EQUITY                                                   6,044,056              4,627,767
                                                                            -----------            -----------

 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                 $51,058,542            $43,234,750
                                                                            ===========            ===========
</TABLE>





The accompanying notes are an integral part of these balance sheets.





                                     21
<PAGE>   25

                       WAYNE BANCORP, INC. AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME
                         FOR THE YEARS ENDED DECEMBER 31


<TABLE>
<CAPTION>
                                                                   1997                  1996                 1995
                                                                ----------            ----------           ----------
 <S>                                                            <C>                   <C>                  <C>
 INTEREST INCOME
   Interest and Fees on Loans                                   $3,036,348            $2,433,258           $1,753,619
   Interest on Federal Funds Sold                                  201,089               124,062              169,365
   Interest on Investment Securities
     U.S. Treasury                                                  86,534               287,587              276,425
     U.S. Government Agencies                                        2,605                48,884              153,802
     Municipals                                                    268,928               142,297               80,982
   Interest on Deposits in Other Banks                               7,463                 3,077               14,721
   Dividends on Other Investments                                   18,112                14,788                9,239
                                                                ----------            ----------           ----------

                                                                 3,621,079             3,053,953            2,458,153
 INTEREST EXPENSE
   Interest on Deposits                                          1,300,994             1,065,545            1,028,414
                                                                ----------            ----------           ----------

 NET INTEREST INCOME                                             2,320,085             1,988,408            1,429,739

   Provision for Loan Losses                                       154,000                90,000                    -
                                                                ----------            ----------           ----------

 NET INTEREST INCOME AFTER PROVISION FOR
   LOAN LOSSES                                                   2,166,085             1,898,408            1,429,739
                                                                ----------            ----------           ----------

 OTHER INCOME
   Service Charges on Deposits                                     461,931               396,895              342,515
   Other Operating Income                                          154,113               156,827              144,317
   Gain on Sale of Securities                                       13,877                15,179               21,216
                                                                ----------            ----------           ----------

                                                                   629,921               568,901              508,048
                                                                ----------            ----------           ----------
 OTHER EXPENSES
   Salaries and Employee Benefits                                  604,599               604,095              536,383
   Occupancy and Equipment                                         200,253               189,189              195,093
   Other Operating Expenses                                        408,760               358,868              383,324
   Office Supplies                                                  74,023                68,848               50,539
   Professional Fees                                                70,278                51,510               48,971
                                                                ----------            ----------           ----------

                                                                 1,357,913             1,272,510            1,214,310
                                                                ----------            ----------           ----------

 INCOME BEFORE INCOME TAXES                                      1,438,093             1,194,799              723,477

 INCOME TAXES                                                      412,763               366,651              225,668
                                                                ----------            ----------           ----------

 NET INCOME                                                     $1,025,330            $  828,148           $  497,809
                                                                ==========            ==========           ==========

 BASIC EARNINGS PER SHARE                                       $     2.58            $     2.19           $     1.33
                                                                ==========            ==========           ==========

 DILUTED EARNINGS PER SHARE                                     $     2.35            $     1.99           $     1.22
                                                                ==========            ==========           ==========
</TABLE>

The accompanying notes are an integral part of these statements.





                                     22
<PAGE>   26

                       WAYNE BANCORP, INC. AND SUBSIDIARY
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995


<TABLE>
<CAPTION>
                                                                                               NET
                                                                                           UNREALIZED
                                                                                           GAIN (LOSS)
                                                                           RETAINED       ON SECURITIES
                                               COMMON                      EARNINGS         AVAILABLE
                                               STOCK        SURPLUS        (DEFICIT)        FOR SALE           TOTAL
                                             ---------    -----------    -------------    -------------    ------------
 <S>                                         <C>          <C>            <C>              <C>              <C>
 BALANCE, DECEMBER 31, 1994                  $ 370,230    $ 3,299,359     $  (428,794)    $(95,034)         $ 3,145,761
   Net Income                                                                 497,809                           497,809
   Net Unrealized Gain on
     Securities Available for Sale,
     Net of Tax                                                                            129,371              129,371
   Issuance of 7,556 Shares
     of Stock                                    7,556         54,743                                           62,299
                                              --------     ----------      ----------      -------           ----------

 BALANCE, DECEMBER 31, 1995                    377,786      3,354,102          69,015       34,337            3,835,240
   Net Income                                                                 828,148                           828,148
   Net Unrealized Loss on
     Securities Available for Sale,
     Net of Tax                                                                            (35,621)             (35,621)
                                              --------     ----------      ----------      -------           ----------

 BALANCE, DECEMBER 31, 1996                    377,786      3,354,102         897,163       (1,284)           4,627,767
   Exercise of Stock Options                     7,556         68,004                                            75,560
   Exercise of Stock Warrants                   39,546        355,914                                           395,460
   Net Income                                                               1,025,330                         1,025,330
   Cash Dividends                                                            (114,722)                         (114,722)
   Net Unrealized Gain on
     Securities Available for Sale,
     Net of Tax                                                                             34,661               34,661
                                              --------     ----------      ----------      -------           ----------


 BALANCE, DECEMBER 31, 1997                  $ 424,888    $ 3,778,020     $ 1,807,771     $ 33,377          $ 6,044,056
                                             =========    ===========     ===========     ========          ===========
</TABLE>


The accompanying notes are an integral part of these statements.





                                     23
<PAGE>   27

                       WAYNE BANCORP, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                         FOR THE YEARS ENDED DECEMBER 31


<TABLE>
<CAPTION>
                                                          1997           1996           1995
                                                      ------------   ------------   ------------
 <S>                                                  <C>            <C>            <C>
 CASH FLOWS FROM OPERATING ACTIVITIES
   Net Income                                         $  1,025,330   $    828,148   $    497,809
   Adjustments to Reconcile Net Income to Net
     Cash Flows from Operating Activities
       Depreciation, Amortization and Accretion            100,790        111,372        117,804
       Provision for Loan Losses                           154,000         90,000             --
       Gain on Sale of Securities                          (13,877)       (15,179)       (21,216)
       Deferred Taxes                                      (32,595)        (4,003)       184,897
       CHANGE IN
         Interest Receivable                               (56,037)           767        (67,950)
         Interest Payable                                   77,134        (20,217)        88,961
         Other                                            (227,987)       314,553         23,879
                                                      ------------   ------------   ------------

                                                         1,026,758      1,305,441        824,184
                                                      ------------   ------------   ------------
 CASH FLOWS FROM INVESTING ACTIVITIES
   Purchases of Investment Securities
     Available for Sale                                   (528,007)    (2,697,802)    (3,491,633)
     Held to Maturity                                   (2,024,055)    (1,579,546)    (2,761,536)
   Proceeds from Maturities of Interest-
     Bearing Deposits in Other Banks                            --             --        600,000
   Proceeds from Maturities of Securities
     Held to Maturity                                      135,000        130,000        250,000
     Available for Sale                                  1,750,000      2,000,000      3,065,000
   Proceeds from Sales of Securities
     Available for Sale                                  3,408,950      1,356,155      3,525,446
     Held to Maturity                                           --             --        609,824
   Proceeds from Sales of OREO                               5,000         33,200             --
   Loans, Net                                           (5,404,942)    (6,981,865)    (2,982,332)
   Bank Premises and Equipment                             (14,577)       (93,382)       (41,381)
   Interest-Bearing Deposits                               131,149       (141,867)      (113,285)
                                                      ------------   ------------   ------------

                                                        (2,541,482)    (7,975,107)    (1,339,897)
                                                      ------------   ------------   ------------
 CASH FLOWS FROM FINANCING ACTIVITIES
   Demand, Interest-Bearing Demand and
     Savings Accounts                                    1,618,154      2,823,545      1,357,684
   Time Deposits                                         4,919,772      1,706,588      1,975,316
   Cash Dividends                                         (114,722)
   Issuance of Stock                                       471,020             --         62,299
                                                      ------------   ------------   ------------

                                                         6,894,224      4,530,133      3,395,299
                                                      ------------   ------------   ------------

 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS        5,379,500     (2,139,533)     2,879,586

 CASH AND CASH EQUIVALENTS, BEGINNING                    9,665,896     11,805,429      8,925,843
                                                      ------------   ------------   ------------


 CASH AND CASH EQUIVALENTS, ENDING                    $ 15,045,396   $  9,665,896   $ 11,805,429
                                                      ============   ============   ============
</TABLE>


The accompanying notes are an integral part of these statements.





                                     24
<PAGE>   28

                       WAYNE BANCORP, INC. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements include the accounts of Wayne Bancorp,
Inc. and its wholly-owned subsidiary, Wayne National Bank (the Bank) located in
Jesup, Georgia. All significant intercompany accounts have been eliminated.

The accounting and reporting policies of Wayne Bancorp, Inc. are presented on
the basis of generally accepted accounting principles and practices utilized in
the commercial banking industry. The following is a description of the more
significant of those policies.

BASIS OF PRESENTATION

In preparing the financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the balance sheet date and revenues and expenses for the period. Actual results
could differ significantly from those estimates.

Material estimates that are particularly susceptible to significant change in
the near-term relate to the determination of the allowance for loan losses, the
valuation of real estate acquired in connection with foreclosures or in
satisfaction of loans and the valuation of deferred tax assets.

INVESTMENT SECURITIES

Investment securities are recorded under the provisions of Statement of
Financial Accounting Standards No. 115 whereby the Bank must classify its
securities as trading, available for sale or held to maturity. Trading
securities are purchased and held for sale in the near term. Securities held to
maturity are those which the Bank has the ability and intent to hold until
maturity. All other securities not classified as trading or held to maturity are
considered available for sale. As of December 31, 1997 and 1996, all investment
securities held by the Bank are classified as available for sale and held to
maturity.

Securities available for sale are measured at fair value with unrealized gains
and losses reported net of deferred taxes as a separate component of
stockholders' equity. Fair value represents an approximation of realizable value
as of December 31, 1997 and 1996. Realized and unrealized gains and losses are
determined using the specific identification method. Premiums and discounts are
recognized in interest income using the straight-line method over the period to
maturity.

LOANS

Loans are generally reported at principal amount less unearned interest and
fees. The Bank records impaired loans under Statement of Financial Accounting
Standards (SFAS) No. 114, Accounting by Creditors for Impairment of a Loan and
SFAS No. 118, Accounting by Creditors for Impairment of a Loan-Income
Recognition and Disclosures. Impaired loans are loans for which principal and
interest are unlikely to be collected in accordance with the original loan terms
and, generally, represent loans delinquent in excess of 90 days which have been
placed on nonaccrual status and for which collateral values are less than
outstanding principal and interest. Small balance, homogeneous loans are
excluded from impaired loans. Generally, interest payments received on impaired
loans are applied to principal. Upon receipt of all loan principal, additional
interest payments are recognized as interest income on the cash basis. As of
December 31, 1997, the Bank had no significant loans classified as impaired
loans.





                                     25
<PAGE>   29

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

LOANS (CONTINUED)

Other nonaccrual loans are loans for which payments of principal and interest
are considered doubtful of collection under original terms but collateral values
equal or exceed outstanding principal and interest.

Wayne National Bank's loans consist of commercial, financial and agricultural
loans, real estate mortgage loans and consumer loans primarily to individuals
and entities located throughout coastal and southeast Georgia. Accordingly, the
ultimate collectibility of the loans is largely dependent upon economic
conditions in those Georgia areas.

ALLOWANCE FOR LOAN LOSSES

The allowance method is used in providing for losses on loans. Accordingly, all
loan losses are charged to the allowance and all recoveries are credited to it.
The provision for loan losses is based on factors which, in management's
judgment, deserve current recognition in estimating possible loan losses. Such
factors considered by management include growth and composition of the loan
portfolio, economic conditions and the relationship of the allowance for loan
losses to outstanding loans.

When impaired loans exist, an allowance for impaired loan losses is maintained.
Provisions are made for impaired loans upon changes in expected future cash
flows or estimated net realizable value of collateral. When determination is
made that impaired loans are wholly or partially uncollectible, the
uncollectible portion is charged off.

Management believes the allowance for possible loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Bank's allowance for loan
losses. Such agencies may require the Bank to recognize additions to the
allowance based on their judgment about information available to them at the
time of their examination.

BANK PREMISES AND EQUIPMENT

Premises and equipment are recorded at acquisition cost net of accumulated
depreciation.

Depreciation is charged to operations over the estimated useful lives of the
assets. The estimated useful lives and methods of depreciation are as follows:

<TABLE>
<CAPTION>
Description                       Life in Years            Method
-------------------------         -------------            ---------------
<S>                               <C>                      <C>
Banking Premises                       25                  Straight-Line

Furniture and Equipment               5-20                 Straight-Line
</TABLE>

Expenditures for major renewals and betterments are capitalized. Maintenance and
repairs are charged to operations as incurred. When property and equipment are
retired or sold, the cost and accumulated depreciation are removed from the
respective accounts and any gain or loss is reflected in other income or
expense.





                                     26
<PAGE>   30

(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INCOME TAXES

Income taxes are provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes.
Deferred taxes are recognized for differences between the basis of assets and
liabilities for financial statement and income tax purposes. The differences
relate primarily to depreciable assets (use of different depreciation methods
for financial statement and income tax purposes) and allowance for loan losses
(use of the allowance method for financial statement purposes and the direct
write-off method for tax purposes). The deferred tax assets and liabilities
represent the future tax return consequences of those differences, which will
either be taxable or deductible when the assets and liabilities are recovered or
settled.

Wayne Bancorp and its subsidiary file consolidated federal and state income tax
returns. Consolidated current and deferred tax expense (benefit) is allocated to
each of the entities based on the separate return method.

OTHER REAL ESTATE

Other real estate owned includes property acquired through foreclosure. These
properties are carried at the lower of cost or current appraisal values. Losses
from the acquisition of property in full or partial satisfaction of debt are
recorded as loan losses. Subsequent declines in value, routine holding costs and
gains or losses upon disposition are included in other expense.

CASH FLOWS

For purposes of reporting cash flows, cash and cash equivalents include cash on
hand and amounts due from banks and federal funds sold.

Cash payments made during 1997, 1996 and 1995 for interest totaled $1,231,431,
$1,087,710 and $942,201, respectively.

Cash payments for income taxes were $755,956 and $62,481 for the years ended
December 31, 1997 and 1996, respectively. Due to net operating loss
carryforwards, no cash payments for income taxes were made in 1995.

Noncash financing and investing activities for the year ended December 31, 1997
included a real estate sale resulting from a loan foreclosure totaling $5,000 in
recoveries and net unrealized gains (losses) on securities available for sale,
net of tax, totaling $50,571, $(1,945) and $52,026 for the years ended December
31, 1997, 1996 and 1995, respectively.





                                     27
<PAGE>   31

(2)  STOCK WARRANTS AND OPTIONS

Organizers purchasing shares of the Company's common stock during the initial
public offering were granted one warrant for each of the original shares
purchased. Each warrant grants the holder the right to acquire one share of
common stock at any time through September 26, 2000 at $10 per share. Except as
specified in the Warrant Agreement, warrants are nontransferable and
nonassignable. As of December 31, 1997 and 1996, warrants outstanding totaled
116,650 and 156,196, respectively.

Stock options have been granted at various times to the Bank's president and
certain vice-presidents pursuant to the "Wayne Bancorp, Inc. 1990 Stock Option
Plan." The maximum number of shares of stock which may be issued or sold shall
not exceed 36,000.

As of December 31, 1997, the status of stock options is as follows:

<TABLE>
<CAPTION>
                         SHARES
  YEAR      OPTIONS      SUBJECT      EXERCISE
GRANTED     GRANTED     TO OPTION       PRICE      EXPIRATION DATE
-------     -------     ---------     --------     ------------------
<S>         <C>         <C>           <C>          <C>
1991        3,778         3,778        $10.00      September 26, 2000

1992        3,702         3,702        $10.00      September 26, 2000
            7,556         7,556        $ 7.25      December  31, 1999

1993        2,074         2,074        $10.00      September 26, 2000
            -----         -----

           17,110        17,110
           ======        ======
</TABLE>


A summary of warrant and option transactions since issuance follows:

<TABLE>
<CAPTION>
                                                               SHARES UNDER
                                                          ----------------------
                                                                       INCENTIVE
                                                           ORIGINAL      STOCK
                                                           WARRANTS     OPTIONS
                                                           --------    ---------
<S>                                                        <C>         <C>
Granted                                                    156,196      24,666
Canceled                                                        --          --
Exercised                                                   39,546       7,556
                                                           -------      ------

Outstanding, December 31, 1997                             116,650      17,110
                                                           =======      ======

Eligible to be Exercised December 31, 1997                 116,650      17,110
                                                           =======      ======
</TABLE>





                                     28
<PAGE>   32


(2)  STOCK WARRANTS AND OPTIONS (CONTINUED)

Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock
Based Compensation, requires new disclosures about employee stock options in
financial statements for fiscal years beginning after December 15, 1994. The
disclosures are required for the proforma effects of options and other awards
granted in fiscal years beginning after December 15, 1994 based upon their fair
value at the date of grant. SFAS 123 is inapplicable to Wayne Bancorp, Inc. for
years presented herein.


(3)  INVESTMENT SECURITIES

The carrying amount of investment securities and their approximate fair values
as of December 31 are summarized as follows:

<TABLE>
<CAPTION>
                                                             GROSS          GROSS
                                               AMORTIZED    UNREALIZED     UNREALIZED       FAIR
                                                  COST        GAINS          LOSSES         VALUE
                                              ----------    ----------     ----------     ----------
         1997

SECURITIES AVAILABLE FOR SALE

<S>                                           <C>           <C>            <C>            <C>       
 Equity Securities                            $  385,880    $   51,767     $   (1,196)    $  436,451
 U.S. Treasury and U.S. 
  Government Agencies
 Other                                            99,000                                      99,000
                                              ----------    ----------     ----------     ----------

                                              $  484,880    $   51,767     $   (1,196)    $  535,451
                                              ==========    ==========     ==========     ==========

SECURITIES HELD TO MATURITY

 Municipals                                   $5,514,009    $  277,087     $       (2)    $5,791,094
                                              ==========    ==========     ==========     ==========


         1996

SECURITIES AVAILABLE FOR SALE

 Equity Securities                            $  232,525    $   11,873     $   (4,127)    $  240,271
 U.S. Treasury and U.S. 
  Government Agencies                          4,772,744         9,905        (19,594)     4,763,055
 Other                                            99,000                                      99,000
                                              ----------    ----------     ----------     ----------

                                              $5,104,269    $   21,778     $  (23,721)    $5,102,326
                                              ==========    ==========     ==========     ==========

SECURITIES HELD TO MATURITY

 Municipals                                   $3,622,528    $   84,150     $  (11,326)    $3,695,352
                                              ==========    ==========     ==========     ==========

</TABLE>





                                       29 
<PAGE>   33

(3)  INVESTMENT SECURITIES (CONTINUED)

Gross realized gains and gross realized losses on sales of securities available
for sale were:

<TABLE>
<CAPTION>
                                                        1997           1996           1995
                                                      --------       --------       --------
<S>                                                   <C>            <C>            <C>    
GROSS REALIZED GAINS
 Equity Securities                                    $60,090        $24,778        $24,393
 U.S. Treasury and U.S. Government Agencies                --          2,774         20,935
                                                      -------        -------        -------

                                                      $60,090        $27,552        $45,328
                                                      =======        =======        =======
GROSS REALIZED LOSSES
 Equity Securities                                    $ 6,210        $ 9,682        $ 2,912
 U.S. Treasury and U.S. Government Agencies            40,003          2,691         21,200
                                                      -------        -------        -------

                                                      $46,213        $12,373        $24,112
                                                      =======        =======        =======
</TABLE>

The scheduled maturities of securities held to maturity and securities available
for sale as of December 31, 1997 were as follows:

<TABLE>
<CAPTION>
                                                                                SECURITIES
                                                    ------------------------------------------------------------------
                                                         AVAILABLE FOR SALE                      HELD TO MATURITY
                                                    ----------------------------         -----------------------------
                                                    AMORTIZED             FAIR           AMORTIZED            FAIR
                                                       COST               VALUE             COST              VALUE
                                                    ---------           --------         ----------        -----------
<S>                                                 <C>                 <C>              <C>               <C>
Due in One Year or Less                             $385,880            $436,451         $   99,647        $   99,811
Due After One Year Through Five Years                                                       399,904           400,378
Due After Five Years Through Ten Years
Due After Ten Years                                                                       5,014,458         5,290,905
                                                    --------            --------         ----------        ----------


Federal Reserve Stock                                 99,000              99,000                 --                --
                                                    --------            --------         ----------        ----------

                                                    $484,880            $535,451         $5,514,009        $5,791,094
                                                    ========            ========         ==========        ==========
</TABLE>

Proceeds from sales of investments in debt securities during 1997, 1996 and 1995
were $2,983,711, $1,356,155 and $4,135,270, respectively.

Investment securities having a carrying value and market value of $1,884,498 and
$2,101,639 as of December 31, 1997 and 1996, respectively, were pledged to
secure public and trust deposits and for other purposes required or permitted by
law.

Interest income on taxable investment securities during 1997, 1996 and 1995 was
$105,177, $353,320 and $444,500, respectively. In 1997, 1996 and 1995 nontaxable
interest income was $252,890, $125,448 and $66,709, respectively.





                                      30 
<PAGE>   34

(4)  LOANS

Loans by type as of December 31 are:
<TABLE>
<CAPTION>
                                                             1997         1996
                                                         -----------   ----------
<S>                                                      <C>          <C>
Commercial, Financial and Agricultural                   $ 5,267,114  $ 3,361,241
Real Estate-Construction                                   1,421,506    2,065,694
Real Estate-Other                                         12,591,205    9,384,490
Consumer                                                   9,389,510    8,261,451
Other                                                         29,355      337,295
                                                         -----------  -----------
                                                         $28,698,690  $23,410,171
                                                         ===========  ===========
</TABLE>

As of December 31, 1997, nonaccrual loans totaled $41,064. The related reduction
in interest income for the year ended December 31, 1997 was approximately $800.
For the years ended December 31, 1996 and 1995, there were no nonaccrual loans.


(5) ALLOWANCE FOR LOAN LOSSES

Transactions in the allowance for loan losses for the years ended December 31
are summarized as follows:

<TABLE>
<CAPTION>
                                               1997         1996         1995
                                            ---------    ---------    ----------
<S>                                         <C>          <C>          <C>
Balance, January 1                          $ 213,969    $ 196,669    $ 339,719
Provision Charged to Operating Expenses       154,000       90,000           --
Loan Losses                                  (134,959)     (88,223)    (162,192)
Recoveries                                     40,395       15,523       19,142
                                            ---------    ---------    ---------

Balance, December 31                        $ 273,405    $ 213,969    $ 196,669
                                            =========    =========    =========
</TABLE>


(6) BANK PREMISES AND EQUIPMENT

The detail of bank premises and equipment as of December 31 is as follows:

<TABLE>
<CAPTION>
                                                            1997         1996
                                                         ----------   ----------
<S>                                                      <C>          <C>
Land                                                     $  186,825   $  186,825
Bank Buildings and Improvements                             682,801      677,919
Furniture, Fixtures and Equipment                           681,292      695,598
                                                         ----------   ----------

                                                          1,550,918    1,560,342
Accumulated Depreciation                                   (643,513)    (563,329)
                                                         ----------   ----------

                                                         $  907,405   $  997,013
                                                         ==========   ==========
</TABLE>





                                      31 
<PAGE>   35

(6) BANK PREMISES AND EQUIPMENT (CONTINUED)

Depreciation charged to operations totaled $104,185, $102,061 and $112,874 in
1997, 1996 and 1995, respectively.


(7) INCOME TAXES

The Bank reports income taxes under Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes, which requires an asset and liability
approach to financial accounting and reporting for income taxes. Deferred income
tax assets and liabilities are computed annually for differences between the
financial statement and tax bases of assets and liabilities that will result in
taxable or deductible amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax expense is
the tax payable or refundable for the period plus or minus the change during the
period in deferred tax assets and liabilities.

The components of income tax expense for the years ended December 31 are:

<TABLE>
<CAPTION>
                                               1997         1996         1995
                                            ---------    ---------    ---------
<S>                                         <C>          <C>          <C>
Current Federal                             $ 443,840    $ 370,654    $  40,771
Deferred Federal                              (32,595)      (4,003)     184,897
                                            ---------    ---------    ---------

Federal Income Tax Expense                    411,245      366,651      225,668
State Income Tax Expense                        1,518           --           --
                                            ---------    ---------    ---------

                                            $ 412,763    $ 366,651    $ 225,668
                                            =========    =========    =========
</TABLE>

The sources of temporary differences and the resulting net deferred income tax
are as follows:

<TABLE>
<CAPTION>
                                                            1997         1996         1995
                                                         ---------    ---------    ---------
<S>                                                      <C>          <C>          <C>
Utilization of Net Operating Loss Carryforward           $     --     $    --      $ 139,493
Provision for Loan Losses                                 (20,209)     (5,882)        48,637
Depreciation                                               (8,632)     (3,221)          (454)
Discount Accretion on Investment Securities                (4,859)      4,309         (5,345)
Tax in Excess of Book Loss on Sale of Equipment             1,105         791             --
Alternative Minimum Tax                                        --          --          7,861
Other                                                          --          --         (5,295)
                                                         --------     -------      ---------

NET DEFERRED TAX                                         $(32,595)    $(4,003)     $ 184,897
                                                         ========     =======      =========
</TABLE>


Income tax expense amounted to $412,763, $366,651 and $225,668 in 1997, 1996 and
1995, respectively, which is more than the tax expense computed by applying the
federal statutory tax rate of 34 percent to income before income taxes. The
reasons for the differences are as follows:





                                      32 
<PAGE>   36


(7) INCOME TAXES (CONTINUED)
<TABLE>
<CAPTION>
                                               1997         1996         1995
                                            ---------    ---------    ---------
<S>                                         <C>          <C>          <C>
STATUTORY FEDERAL TAXES                     $ 488,952    $ 406,231    $ 245,982
Increase (Reductions) Resulting from
  Tax-Free Interest on Municipals             (85,319)     (42,060)     (22,348)
  Tefra Interest Disallowance                  10,008        4,672        2,758
  Officers' Life Insurance                        319          298          261
  Meals and Entertainment                         597          492          484
  Other                                        (3,312)      (2,982)      (1,469)
                                            ---------    ---------    ---------

ACTUAL FEDERAL TAXES                        $ 411,245    $ 366,651    $ 225,668
                                            =========    =========    =========
</TABLE>


The components of the net deferred tax assets included in other assets in the
accompanying consolidated balance sheets as of December 31 are as follows:

<TABLE>
<CAPTION>
                                                           1997         1996
                                                         --------     --------
<S>                                                      <C>          <C>
DEFERRED TAX ASSETS

 Net Unrealized Loss on Securities Available for Sale    $     --     $    661
 Reserve for Loan Losses                                   92,958       72,749
                                                         --------     --------

                                                           92,958       73,410
                                                         --------     --------

 Net Unrealized Gain on Securities Available for Sale     (17,194)          --
 Depreciation and Disposal of Premises and Equipment      (22,047)     (29,575)
 Investment Securities Accretion                           (2,135)      (6,993)
 Other                                                     (4,333)      (4,333)
                                                         --------     --------

                                                          (45,709)     (40,901)
                                                         --------     --------

NET DEFERRED TAX ASSETS                                  $ 47,249     $ 32,509
                                                         ========     ========
</TABLE>


(8) DEPOSITS

Components of interest-bearing deposits as of December 31 are as follows:

<TABLE>
<CAPTION>
                                                             1997         1996
                                                         -----------  -----------
<S>                                                      <C>          <C>

Interest-Bearing Demand                                  $ 7,011,059  $ 6,120,488
Savings                                                    2,147,507    2,228,421
Time $100,000 and Over                                     5,983,606    4,434,446
Other Time                                                15,633,066   12,262,454
                                                         -----------  -----------
                                                         $30,775,238  $25,045,809
                                                         ===========  ===========
</TABLE>






                                      33 
<PAGE>   37


(8)  DEPOSITS (CONTINUED)

The aggregate amount of short-term jumbo certificates of deposit, each with a
minimum denomination of $100,000, approximated $4,793,000 and $3,816,900 in
1997 and 1996, respectively.

As of December 31, 1997, the scheduled maturities of time deposits are as
follows:

<TABLE>
<CAPTION>
                       Year                                                                          Amount
               -------------------                                                               -----------
 <S>           <C>                                                                               <C>
                       1998                                                                      $18,846,577
                       1999                                                                        2,048,213
                       2000                                                                          400,132
                       2001                                                                           66,490
               2002 and thereafter                                                                   255,260
                                                                                                 -----------

                                                                                                 $21,616,672
                                                                                                 ===========
</TABLE>


(9)  COMMITMENTS AND CONTINGENCIES

In the normal course of business, certain commitments and contingencies are
incurred which are not reflected in the financial statements.  As of December
31, 1997 and 1996, the Company had unfunded loan commitments and commitments
under standby letters of credit totaling $3,141,000 and $2,134,376,
respectively.  These commitments were made under normal terms and rates.  No
losses are anticipated as a result of these commitments.

The Bank is committed to purchase equipment and software approximating $140,000
during 1998.


(10) RELATED PARTY TRANSACTIONS

The aggregate balance of direct and indirect loans to directors, executive
officers or principal holders of equity securities of the Bank was $570,013 and
$373,953 as of December 31, 1997 and 1996, respectively.  All such loans were
made on substantially the same terms, including interest rates and collateral,
as those prevailing at the time for comparable transactions with other persons.
A summary of activity of related party loans is shown below:

<TABLE>
<CAPTION>
                                          1997             1996
                                       ---------        ---------

<S>                                    <C>              <C>      
BALANCE, DECEMBER 31                   $ 373,953        $  60,070

   New Loans                             238,227          365,410
   Repayments                            (42,167)         (51,527)
                                       ---------        ---------

BALANCE, DECEMBER 31                   $ 570,013        $ 373,953
                                       =========        =========
</TABLE>


                                      34 

<PAGE>   38


(11) OTHER INCOME

Significant components of other operating income are:
<TABLE>
<CAPTION>
                                               1997         1996        1995
                                             -------       ------      -------
<S>                                          <C>           <C>         <C>
Commissions on Credit Life Insurance         $39,795       $43,403     $37,648

Mortgage Origination Fees                     60,478        63,967      49,697
</TABLE>


(12) OTHER EXPENSES

Significant components of other operating expenses are:
<TABLE>
<CAPTION>
                                                                           1997               1996                1995
                                                                         -------            -------             --------     
 <S>                                                                     <C>                <C>                 <C>
 Office Supplies                                                         $74,023            $74,195             $55,193
 Postage and Freight                                                      46,776             42,857              37,400
 Audit, Tax, Accounting and Consulting                                    39,298             40,858              30,120
 ATM Fees and Expense                                                     39,209             36,455              38,122
 Amortization and Organizational Cost                                        -                  -                20,704
 Advertising and Public Relations                                         34,655             21,817              24,520
 FDIC Assessment                                                           3,719              2,000              30,280
 Clearing House and Federal Reserve Processing Fees                       26,021             26,188              29,651
 Directors' Fees                                                          41,750             41,900              24,000
 Data Processing                                                          22,541             20,944              17,789
 Legal Fees                                                               29,980              9,652              17,851
</TABLE>


(13) EARNINGS PER SHARE

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 128 (Statement 128), Earnings per Share.  Statement
128 establishes standards for computing and presenting earnings per share
(EPS), and supersedes Accounting Principles Board Opinion No. 15 (APB 15) and
its related interpretations.  It replaces the presentation of primary EPS with
basic EPS, which excludes dilution, and requires dual presentation of basic and
diluted EPS for all entities with complex capital structures.  Diluted EPS is
computed similarly to fully diluted EPS pursuant to APB 15.  Statement 128 is
effective for periods ending after December 15, 1997, including interim
periods, and will require restatement of all prior period EPS data presented;
earlier application is not permitted.  The following presents earnings per
share for the years ended December 31, 1997, 1996 and 1995 as if Statement 128
had been in effect.

<TABLE>
<CAPTION>
                                                                      1997                 1996                 1995
                                                                   ---------             --------             --------
<S>                                                                <C>                   <C>                  <C>
BASIC EARNINGS PER SHARE
   Net Income Per Common Share                                     $   2.58              $   2.19              $   1.33
   Weighted Average Common Shares                                   397,245               377,786               374,660

DILUTED EARNINGS PER SHARE
   Net Income Per Common Share                                     $   2.35              $   1.99              $   1.22
   Weighted Average Common Shares                                   436,947               415,620               406,535
</TABLE>



                                      35 


<PAGE>   39


(14) FINANCIAL INFORMATION OF WAYNE BANCORP, INC. (PARENT ONLY)

Wayne Bancorp, Inc.'s (parent only) balance sheets as of December 31, 1997 and
1996 and the related statements of income and cash flows for each of the years
in the three-year period ended December 31, 1997 are as follows:


                                 BALANCE SHEETS
                                   DECEMBER 31


                                     ASSETS

<TABLE>
<CAPTION> 

                                                                                       1997                1996
                                                                                   ------------        ------------
<S>                                                                                <C>                 <C>
Cash                                                                               $    7,493          $   37,239
Interest-Bearing Deposits in Bank                                                     565,425             181,612
Investment Securities Available for Sale                                              436,451             240,271
Investment in Wayne National Bank                                                   5,065,832           4,173,036
Other Assets                                                                          114,722                   -
                                                                                   ----------          ----------

                                                                                   $6,189,923          $4,632,158
                                                                                   ==========          ==========



                      LIABILITIES AND STOCKHOLDERS' EQUITY


Accrued Expenses                                                                   $    8,000                   -
Deferred Taxes                                                                         18,907               4,346
Accrued Income Taxes                                                                    4,238                  45
Other                                                                                 114,722                   -
                                                                                   ----------          ----------

                                                                                      145,867               4,391
                                                                                   ----------          ----------


Common Stock                                                                          424,888             377,786
Surplus                                                                             3,778,020           3,354,102
Retained Earnings                                                                   1,807,771             897,163
Net Unrealized Gain (Loss) on Securities Available for Sale,
  Net of Tax (Benefit) of $17,194 in 1997 and $(661) in 1996                           33,377              (1,284)
                                                                                   ----------          ----------


                                                                                    6,044,056           4,627,767
                                                                                   ----------          ----------

                                                                                   $6,189,923          $4,632,158
                                                                                   ==========          ==========
</TABLE>



                                      36 
<PAGE>   40


(14) FINANCIAL INFORMATION OF WAYNE BANCORP, INC. (PARENT ONLY) (CONTINUED)


                              STATEMENTS OF INCOME
                         FOR THE YEARS ENDED DECEMBER 31


<TABLE>
<CAPTION>
                                                                       1997                 1996               1995
                                                                  ------------            --------            --------

<S>                                                               <C>                     <C>                 <C>
Interest Income                                                   $     10,094            $  4,468            $ 11,184
Dividends                                                              126,894               8,847               3,316
Gain on Sale of Securities                                              53,881              15,096              21,481
                                                                  ------------            --------            --------


                                                                       190,869              28,411              35,981
                                                                  ------------            --------            --------

Expenses
   Amortization                                                              -                   -               9,835
   Printing and Supplies                                                 5,229               5,346               4,655
   Postage                                                               1,558               1,730               1,861
   Legal and Professional                                               26,942              10,367              18,401
   Taxes                                                                   250                 250                 278
   Miscellaneous                                                         8,363               2,961               1,388
                                                                  ------------            --------            --------

                                                                        42,342              20,654              36,418
                                                                  ------------            --------            --------


Income (Loss) Before Income Tax Benefit and
   Equity in Undistributed Earnings of Subsidiary                      148,527               7,757                (437)

Income Tax Benefit                                                       9,598                   -                 938
                                                                  ------------            --------            --------

Income Before Equity in Undistributed
   Earnings of Subsidiary                                              138,929               7,757                 501


Equity in Undistributed Earnings of Subsidiary                         886,401             820,391             497,308
                                                                  ------------            --------            --------

NET INCOME                                                          $1,025,330            $828,148            $497,809
                                                                  ============            ========            ========
</TABLE>



                                     - 37 -


<PAGE>   41

(14) FINANCIAL INFORMATION OF WAYNE BANCORP, INC. (PARENT ONLY) (CONTINUED)


                            STATEMENTS OF CASH FLOWS
                         FOR THE YEARS ENDED DECEMBER 31


<TABLE>
<CAPTION>
                                                             1997          1996       1995
                                                         -----------    ---------   ---------
<S>                                                      <C>            <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net Income                                             $ 1,025,330    $ 828,148   $ 497,809
  Adjustments to Reconcile Net Income to Net
    Cash Flows from Operating Activities
      Amortization and Accretion                                  --           --       9,835
      Equity in Undistributed Earnings
        of Subsidiary                                       (886,401)    (820,391)   (497,308)
      Gain on Sale of Securities                             (53,881)     (15,096)    (21,481)
      Deferred Taxes                                              --       52,798        (939)
      CHANGE IN

        Other                                                 12,195           45          --
                                                         -----------    ---------   ---------


                                                              97,243       45,504     (12,084)
                                                         -----------    ---------   ---------

CASH FLOWS FROM INVESTING ACTIVITIES
  Interest-Bearing Deposits in Bank                         (383,813)      33,683    (131,204)
  Purchases of Investment Securities
    Available for Sale                                      (528,007)    (397,763)   (520,510)
  Proceeds from Maturities of Securities
    Available for Sale                                            --           --     300,000
  Proceeds from Sales of Securities
    Available for Sale                                       428,533      355,764     294,930
                                                         -----------    ---------   ---------

                                                            (483,287)      (8,316)    (56,784)
                                                         -----------    ---------   ---------


CASH FLOWS FROM FINANCING ACTIVITIES
  Cash Dividends                                            (114,722)          --          --
  Issuance of Stock                                          471,020           --      62,299
                                                         -----------    ---------   ---------

                                                             356,298           --      62,299
                                                         -----------    ---------   ---------


INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS                                           (29,746)      37,188      (6,569)

CASH AND CASH EQUIVALENTS, BEGINNING                          37,239           51       6,620
                                                         -----------    ---------   ---------


CASH AND CASH EQUIVALENTS, ENDING                        $     7,493    $  37,239   $      51
                                                         ===========    =========   =========
</TABLE>


                                      38 
<PAGE>   42

(15) FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, Disclosures about Fair Value of Financial Instruments, requires
disclosure of fair value information about financial instruments, whether or
not recognized on the face of the balance sheet, for which it is practicable to
estimate that value.  The assumptions used in the estimation of the fair value
of Wayne National Bank's financial instruments are detailed below.  Where
quoted prices are not available, fair values are based on estimates using
discounted cash flows and other valuation techniques.  The use of discounted
cash flows can be significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows.  The following disclosures
should not be considered a surrogate of the liquidation value of the Bank, but
rather a good-faith estimate of the increase or decrease in value of financial
instruments held by the Bank since purchase, origination or issuance.

   CASH AND SHORT-TERM INVESTMENTS - For cash, due from banks, federal funds
   sold and interest-bearing deposits with other banks, the carrying amount is
   a reasonable estimate of fair value.

   INVESTMENT SECURITIES - Fair values for investment securities are based on
   quoted market prices.

   LOANS - The fair value of fixed rate loans is estimated by discounting the
   future cash flows using the current rates at which similar loans would be
   made to borrowers with similar credit ratings.  For variable rate loans, the
   carrying amount is a reasonable estimate of fair value.

   DEPOSIT LIABILITIES - The fair value of demand deposits, savings accounts
   and certain money market deposits is the amount payable on demand at the
   reporting date.  The fair value of fixed maturity certificates of deposit is
   estimated by discounting the future cash flows using the rates currently
   offered for deposits of similar remaining maturities.

   STANDBY LETTERS OF CREDIT - Because standby letters of credit are made using
   variable rates, the contract value is a reasonable estimate of fair value.

The carrying amount and estimated fair values of the Bank's financial
instruments as of December 31, 1997 are as follows:

<TABLE>
<CAPTION>
                                                                                        Carrying            Estimated
                                                                                         Amount             Fair Value
                                                                                        --------            ----------
                                                                                               (IN THOUSANDS)
<S>                                                                                     <C>                  <C>
ASSETS
   Cash and Short-Term Investments                                                      $15,169              $15,169
   Investment Securities Available for Sale                                                 535                  535
   Investment Securities Held to Maturity                                                 5,514                5,791
   Loans                                                                                 28,398               28,623

LIABILITIES

   Deposits                                                                              44,554               44,558

UNRECOGNIZED FINANCIAL INSTRUMENTS
   Unfunded Loan Commitments and Standby Letters of Credit                                3,141                3,141
</TABLE>



                                      39 


<PAGE>   43

(15) FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument.  These
estimates do not reflect any premium or discount that could result from
offering for sale at one time the Bank's entire holdings of a particular
financial instrument.  Because no market exists for a significant portion of
the Bank's financial instruments, fair value estimates are based on many
judgments.  These estimates are subjective in nature and involve uncertainties
and matters of significant judgment and therefore cannot be determined with
precision.  Changes in assumptions could significantly affect the estimates.

Fair value estimates are based on existing on and off-balance sheet financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments.  Significant assets and liabilities that are not
considered financial instruments include the deferred income taxes and premises
and equipment.  In addition, the tax ramifications related to the realization
of the unrealized gains and losses can have a significant effect on fair value
estimates and have not been considered in the estimates.


(16) REGULATORY CAPITAL MATTERS

The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies.  Failure to meet minimum capital requirements can
initiate certain mandatory and, possibly, additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements.  Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities and certain off-balance sheet items as calculated under regulatory
accounting practices.  The Bank's capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios of total and Tier I
capital to risk-weighted assets, and of Tier I capital to average assets.  The
amounts and ratios as defined in banking regulations are presented hereafter.
Management believes, as of December 31, 1997, the Bank meets all capital
adequacy requirements to which it is subject and is classified as well
capitalized under the regulatory framework for prompt corrective action.

The amount of dividends available to the parent company from the subsidiary
bank is limited by various banking regulatory agencies.  The amount of cash
dividends available for payment in 1998, without prior approval from banking
regulatory agencies, approximates $500,000.  Upon specific approval, banks may
pay cash dividends in excess of regulatory limitations.


                                      40 


<PAGE>   44

(16) REGULATORY CAPITAL MATTERS (CONTINUED)


<TABLE>
<CAPTION>
                                                                                                     To Be Well
                                                                                                  Capitalized Under
                                                                    FOR CAPITAL                   Prompt Corrective
                                      Actual                     Adequacy Purposes                Action Provisions
                            ----------------------------    ----------------------------    -----------------------------
                               Amount           Ratio         Amount            Ratio           Amount            Ratio
                            -----------       ---------     ----------       -----------    -------------      ----------
 <S>                        <C>               <C>           <C>              <C>            <C>                <C>
 AS OF DECEMBER 31, 1997

 Total Capital
   (to Risk-Weighted        $6,250,708           20.24%     $2,470,445          8.00%       $30,880,556           10.00%
 Assets)
 Tier I Capital
   (to Risk-Weighted         5,977,302           19.36       1,235,222          4.00          1,852,833            6.00
 Assets)
 Tier I Capital
   (to Average Assets)       5,977,302           14.84       1,611,296          4.00          2,014,120            5.00


 AS OF DECEMBER 31, 1996

 Total Capital
   (to Risk-Weighted         4,843,020           19.57       1,979,879          8.00          2,474,849           10.00
 Assets)
 Tier I Capital
   (to Risk-Weighted         4,629,051           18.70         989,940          4.00          1,484,910            6.00
 Assets)
 Tier I Capital
   (to Average Assets)       4,629,051           12.33       1,502,094          4.00          1,877,617            5.00
</TABLE>


(17) EMPLOYEE BENEFIT PLANS

The Bank established a 401(k) retirement plan during 1996 for which all
employees twenty-one years of age with one year of service are eligible.  The
plan is funded with employee and employer contributions.  Employees may
contribute up to 15 percent of their annual salaries.  The employer's amount of
matching may vary from year to year, but will initially match 25 percent of the
employee's first 6 percent of salary.  Retirement plan expense for the years
ended December 31, 1997 and 1996 totaled $5,890 and $5,885, respectively.


(18) RECLASSIFICATIONS

Certain reclassifications have been made within the 1996 and 1995 financial
statements to conform to the 1997 presentation.


                                      41 
<PAGE>   45


<TABLE>
<CAPTION>

WAYNE BANCORP, INC. & WAYNE NATIONAL BANK
BOARD OF DIRECTORS

<S>                                                             <C>  
J. Ashley Dukes                                                 J. Lex Kenerly, III, M.D.
Chairman of Wayne Bancorp, Inc.                                 Secretary of Wayne Bancorp, Inc.
and Wayne National Bank                                         and Wayne National Bank
President/Wayne Drug Co., Inc.                                  Orthopedic Surgeon

Patricia B. Armstrong                                           James L. Lott
Owner/Armstrong's Photography                                   Owner/Lott Tobacco Company

Leonard D. Brannen                                              Jerry D. McDaniel
Retired                                                         Owner/McDaniel Vending & Food Service

C. Revis Clary                                                  Ferrell L. O'Quinn
Owner/Clary Fertilizer Co.                                      Entrepreneur

Tommie C. Fuller, Sr.                                           Bernon W. Sapp
Retired Educator                                                Owner/Sapp Ford Company

Douglas R. Harper                                               W. Donald Whitaker
President and CEO                                               President/Whitaker's Pharmacy, Inc.
Wayne Bancorp, Inc.
and Wayne National Bank

WAYNE BANCORP, INC. & WAYNE NATIONAL BANK
OFFICERS

Douglas R. Harper                                               J. Lex Kenerly, III, M.D.
President and CEO                                               Secretary
Wayne Bancorp, Inc.                                             Wayne Bancorp, Inc.
and Wayne National Bank                                         and Wayne National Bank

Linton F. Lewis                                                 J. Randall Teston
Executive Vice President and                                    Vice President
Senior Lending Officer                                          Wayne National Bank
Wayne National Bank

Patti D. Hayes                                                  Randall D. Hicks
Assistant Vice President                                        Cashier and Compliance Officer
Wayne National Bank                                             Wayne National Bank
</TABLE>

REGISTRAR AND TRANSFER AGENT
Wayne Bancorp, Inc.

ANNUAL MEETING OF SHAREHOLDERS

         The Annual Meeting of Shareholders of Wayne Bancorp, Inc. will be held
Tuesday, April 14, 1998, at 6:00 p.m. in the lobby of Wayne National Bank, 818
South First Street, Jesup, Georgia.

         COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1997, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, WILL BE FURNISHED AT NO CHARGE TO SHAREHOLDERS AS OF THE RECORD
DATE UPON WRITTEN REQUEST TO: DOUGLAS R. HARPER, WAYNE BANCORP, INC., 818 SOUTH
FIRST STREET, JESUP, GEORGIA 31545.





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